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Caution on road privatisation in AI report

Major industry and business groups have continued to back infrastructure privatisation following Infrastructure Australia’s latest report

By Rob McKay and Anna Game-Lopata | October 19, 2012

Major industry and business groups have continued to back infrastructure privatisation following Infrastructure Australia’s (AI’s) latest report but little is being said on taking such an approach to roads.

The Australian Logistics Council (ALC) and the Business Council of Australia (BCA) backed the broad thrust of AI’s report: that government budgets were not up to the financial challenge of infrastructure investment but asset sales and privatisations, in the right circumstances, could free-up much-needed cash for such strategic spending.

However, the report itself, Australia’s Public Infrastructure – Part of the Answer to Removing the Infrastructure Deficit, took a cautious line on road privatisation.

“Significant work, including improved technology, a congestion charging regime and achieving broad public acceptance will be needed to achieve an efficient road pricing strategy.

“Road pricing could generate significant additional revenues to fund new road infrastructure and maximise the efficient use of existing infrastructure.

“For example, the recent New South Wales Financial Audit suggested that efficient congestion pricing could raise up to $5 billion in gross revenue per annum.

“In the absence of such network-wide reforms, transfer of individual road to private sector ownership and imposition of tolls may have negative network impacts and the resulting long-term concessions may impede achieving overall network-wide reforms.”

The ALC backs recent road pricing efforts as a “significant” source of funds for new roads infrastructure and increasing the efficient use of new infrastructure

“In its report, Infrastructure Australia notes that road pricing could generate significant additional revenues to fund new road infrastructure and maximise the efficient use of existing infrastructure,” ALC Managing Director Michael Kilgariff says.

“This underscores the importance of the Heavy Vehicle Charging and Investment Reform project, which needs to work closely with industry to develop possible reform options that deliver improved productivity and more efficient supply chains.

“It is equally important that the HVCI project not be used simply as an additional revenue raising mechanism by governments that deliver no additional benefit to the logistics industry.”

In March, the British Prime Minister David Cameron announced the UK would launch a feasibility study into partial privatisation, allowing sovereign-wealth and pension funds invest in roads while receiving a proportion of road taxes in recompense, rather than using tolls.

“In its report, Infrastructure Australia notes that road pricing could generate significant additional revenues to fund new road infrastructure and maximise the efficient use of existing infrastructure,” Cameron said at the time.

The idea has been dubbed the Rothschild Plan, after the merchant bank that raised the idea three years ago, suggesting the equivalent of $155 billion could be raised by privatising the UK road network.

It was mentioned this week in the Australian Financial Review, but not in relation to the AI report.

But Kilgariff is not sold on the idea of having competing systems and reform pathways, especially involving private ownership and control, especially given that there is a reform process already in place.

“The IA report illustrates the clear need for a National Transport Agreement to determine a transparent set of principles as to how roads are to be funded, as outlined in the Henry Report,” he says.

“Otherwise, different road owners may use different pricing models to access their roads.

“This could distort efficiency in the freight chain if some road owners seek to require heavy vehicle operators to cross subsidise other users.

“This also means that the work being conducted by the Heavy Charging and Investment Reform has the urgency of now.”

More broadly, Federal Infrastructure Minister Anthony Albanese says the IA report is a significant contribution to the debate and further discussion about the sale of state assets to fund infrastructure will take place with the relevant ministers at next month’s Standing Committee on Transport and Infrastructure (SCOTI) meeting.

“However the government would warn that asset sales must take the community with them,” a spokesperson for the department says.

“You only need to witness the significant backlash against the Bligh government in Queensland following the sale of public assets which did not have the support of the community.”

The spokesperson confirms the government has no plans to privatise the Australian Rail Track Corporation (ARTC).

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