Feedback sought on independent price setting model


Discussion paper says independent regulator will provide pricing certainty to industry and improve transparency on how charges are set

Feedback sought on independent price setting model
Both ATA and ALC are behind the plan for an independent price regulator.

 

The federal government is seeking industry and public response to the proposal of an independent price regulator of heavy vehicle charges.

The Department of Infrastructure and Transport states an independent price regulator will enable:

  • decisions on heavy vehicle charges to be made at arm’s length from government
  • reasons and evidence for pricing decisions made readily available and transparent
  • pricing decisions to be binding on governments.

The Independent price regulation of heavy vehicle charges discussion paper suggests that independent price setting will provide greater certainty to the heavy vehicle industry by separating the price setting process from government budget considerations and also improve transparency on how charges are set.

The paper has met with the approval of peak transport bodies including the Australian Trucking Association (ATA) and the Australian Logistics Council (ALC).

ATA chair Geoff Crouch says heavy vehicle charges must be set at arm’s length from the government to make sure they fairly represent the costs of heavy vehicles on the road network. 

"As the discussion paper recognises, the current charging system is not working," Crouch says. 

"When the National Transport Commission – an independent government body – found that the current system overcharged truck and bus operators, governments chose to freeze revenue instead of cutting charges to a fair level. 

"Truck and bus operators will be overcharged for their use of the roads by more than half a billion dollars across the freeze period, 2016-17 and 2017-18. 

"The ATA will work with our member organisations to provide the Government with recommendations on setting up the independent regulator."

Truck and bus operators pay for their use of the roads through a fuel based road user charge, administered as a reduction in their fuel tax credits, and very high registration charges. 

The government has confirmed that the road user charge will reduce from 25.9 to 25.8 cents per litre from 1 July 2017. 

"Trucking businesses operate on tight margins, and the confirmation of the reduction in the truck fuel tax rate provides welcome certainty for industry," Crouch says. 

"The reduction delivers one of the recommendations of the ATA’s 2017-18 pre-budget submission. 

"Due to the growth in the amount of freight on our roads, the reduction was needed to deliver the Australian Government’s part of the freeze on heavy vehicle revenue. 

"Governments must agree to continue the revenue freeze beyond 30 June 2018 until the new independent price regulation system is established."

ALC MD Michael Kilgariff says the logistics council supports an analysis of the current pay-as-you-go (PAYGO) formula for road pricing, calling it an "inefficient and ultimately unsustainable approach to road pricing".

He says a wide ranging public debate involving government, industry and the community will ensure road funding reform proposals improve Australia’s supply chain efficiency.

"Australia’s freight logistics industry and the wider economy rely heavily on an efficient road network. Independent price regulation will help to achieve this by more directly linking road use charges with government investment in the road network," Kilgariff says.

Both ATA and ALC had asked the government to consider an independent price regulator for the industry in their pre-election submissions.

"ALC’s 2016 Election Priorities document, Getting The Supply Chain Right, supported the creation of a single national economic regulator for the land transport industry, so road and rail pricing and access decisions are made in a consistent manner," Kilgariff says.

"We also said such a body should be given responsibility to ensure appropriate structures are established to govern pricing and access conditions relating to general freight on interstate rail routes and the broader land transport market – including the development of a pricing mechanism to manage the transition from the current PAYGO system to a new road pricing model."

"However, no matter which option for an independent price regulator is ultimately chosen, it is crucial that the Government maintains the confidence of industry by ensuring that revenue raised through a new road pricing system is actually used to support road infrastructure on key freight routes, and not simply subsumed into consolidated revenue."

"Getting road pricing right is a vitally important component of the National Freight and Supply Chain Strategy, which is now being developed by the Federal Government.

"ALC looks forward to making a submission to the consultation process on the Discussion Paper."

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