Pressure mounts on politicians as commercial and personal road users seek debate
Peak freight body the Australian Logistics Council (ALC) sees the motoring sector mounting a case for road pricing as a crucial juncture in the debate on transport infrastructure funding.
The nation’s top motoring clubs supported an Infrastructure Partnerships Australia (IPA)/Deloitte research project to examine the issue.
Road Pricing and Transport Infrastructure Funding: Reform Pathways for Australia was developed in partnership with the Australian Automobile Association and the three largest motoring clubs, the NRMA, RACQ and RACV.
IFC CEO Brendan Lyon says the report backs the Productivity Commission’s position on transport pricing reform in its recent draft infrastructure report.
“Everyone can see that the current approach to funding roads is broken, and our research identifies that this problem will worsen, without change,” Lyon states.
“Australia will not fix fundamental transport problems by tinkering with modest and incremental change.
“Our report considers how a model of direct charging could be used to increase funding for the transport network and manage congestion, leading to a substantially fairer system for motorists and users.
“The central recommendation of our report is for the Commonwealth to ask the Productivity Commission to begin a detailed public inquiry into the funding, regulation and pricing of Australia’s road transport market, including consideration of the capacity of the existing framework to fund future investment.”
The ALC says it is heartened by the report.
“The fact that Australia’s major automobile clubs, which represent millions of ordinary motorists, have produced a report advocating widespread change underscores the need for a sensible and informed community discussion on future reform options,” ALC Managing Director Michael Kilgariff says.
The report’s conclusion “that the current system of transport network pricing is no longer fit for purpose” reflects a growing consensus among peak industry bodies that the current system of vehicle charging and investment needs to put under the microscope”.
“ALC has been an active participant in this debate, as we acknowledge the potential benefits that could flow from the way we price and invest in logistics infrastructure, particularly when the dollars follow the freight.
“For example, ALC has been calling for a national road transport agreement to establish the objectives, outcomes, outputs and incentives to guide governments in the use and supply of road infrastructure.
“We also believe a single institution needs to be nominated to lead road tax reform and this report underscores the need for such an agreement.
“Cabinet’s newly formed Infrastructure Committee comprising the Prime Minister, Treasurer, Assistant Minister for Infrastructure and Regional Development, the Parliamentary Secretary to the Prime Minister and departmental secretaries is the most appropriate body to consider the need for a roads agreement.”
On the specific issue of extending road use charging to all motorists, Mr Kilgariff said ALC believed there needs to be a paradigm shift from the concept of road infrastructure being a public good funded by budgets and towards a concept where there is a direct charging of all uses.
“Growing pressure on state budgets necessitates serious consideration of where we go from here, because it is becoming increasingly clear the current system will not support maximum efficiency and productivity in the long term,” he says.
“But given the potential size and scope of any such reform, the process cannot be rushed and needs to be informed through detailed reports such as this.”
The Productivity Commission’s draft Public Infrastructure report set the toll roads drums beating again earlier this month, with both the Australian Logistics Council (ALC) and Infrastructure Partnerships Australia reiterating their stances in favour of the concept.
While demanding reform of processes in the assessment and development of public infrastructure projects, the PC put taxpayers of various stripes, as users or those that ultimately gain from infrastructure construction, on notice that they will ultimately pay something towards the cost.
“Well-designed user charges should be used to the fullest extent that can be justified,” it states in its key points.
“However, governments will have to at least partly fund some infrastructure projects and address equity issues.
“Significant road pricing and institutional arrangements are proposed to create more direct links to road users and to take advantage of advances in vehicle technology.”
For cars and other light vehicles, it advises that governments should undertake pilot technical studies of revenue-neutral direct road user charging using vehicle telematics and extend tolling across existing road networks as it becomes practical and cost‑effective to do so.
“The application of charging mechanisms created by rapidly‑changing communications technology appears promising,” it adds.
The PC also throws some cold water over proponents of private investment and public private partnerships (PPP), noting that PPP attracts higher costs relating to development, bidding, contracting and ensuring appropriate risk allocations.
On alternative roads funding arrangements, notwithstanding its positive view of the
COAG Heavy Vehicle Charging and Investment (HVCI) project, the PC believes more work needs to be done.
“Transitioning to new institutional models for road provision might facilitate community acceptance of more direct user charging in the long term and improve funding and provision of road services for cars and other light vehicles in both the short‑ and long‑terms,” it says.
“There are two broad types of models: the road fund model and the regulated public road agency model. New Zealand has experience with versions of the road fund model.”
One model it discounts, however, is the creation of a national infrastructure fund.
At the time Kilgariff said the PC’s position is broadly in tune with its submission.
“ALC supports the introduction of some form of mass distance location charging for heavy vehicles so long as funds collected are actually invested in infrastructure used by vehicles, that is, revenue follows the freight, and not diverted into consolidated revenue for use for other purposes.
“Given the Productivity Commission recommends that governments need to take into account HVCI’s work on heavy vehicle charging to inform possible future reforms for cars and other light vehicles, it is imperative the HVCI secretariat progresses its current phase of work in a timely manner.”
Kilgariff welcomed the report’s recognition that while the national port and freight strategies acknowledge the need to improve land planning and corridor preservation, there does not appear to be a formal agreement between jurisdictions.
“ALC therefore agrees with the Productivity Commission’s assessment that a critical part of any national regime would need to include an intergovernmental planning process and agreement on commitment of funds for corridor protection.”
Industry Super Australia (ISA) welcomed the backing for the ‘inverted bid model, whereby government tenders for the long-term owner-operator first, followed by separate bids for construction, operation and maintenance, and debt.
And the body is bullish about the chances of funnelling more super money into such developments and about keeping costs down.
“From roads to airports, pipelines to ports and areas yet to be even thought of, if we can get the settings right here, the sky is the limit,” ISA CEO David Whiteley says.
“Coupled with the announcement today of a superannuation investment forum from Treasurers’ Hockey and Baird, we are potentially on the verge of a policy breakthrough on how infrastructure is financed and procured.”
The motoring organisations’ report can be found here.
The PC’s draft report can be found here.