Productivity Commission’s road charges position backed


Message is that taxpayer can’t escape all cost of infrastructure and there are no silver bullets

Productivity Commission’s road charges position backed
The PC pulled few punches in its draft report

 

The Productivity Commission’s draft Public Infrastructure report has set the toll roads drums beating again, 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.

"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.

ALC Managing Director Michael Kilgariff says 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," he said.

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."

IPA Chief Executive Brendan Lyon points out thatreforms will need to go deeper given the pivotal role of cash-poor states in implementation and construction.

Lyon also backs road charges.

"The recommendation around the broader application of user charging, in conjunction with government funding, should be welcomed because it would better align road related revenue to future investment, and would transform the way we fund transport infrastructure," he says.

"The call for better institutional arrangements around the provision and delivery of infrastructure – including greater rigour and transparency around the planning and prioritisation of infrastructure projects – is another excellent step that aligns well with reforms currently underway to Infrastructure Australia.

The draft report can be found here.

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