Overview

The Federal Government announced yesterday that it will conduct a public inquiry into road user charging. This is an important step in the journey towards replacing vehicle registration fees and fuel excises with a 'user pays' model based on road usage. However, Major Projects Minister Paul Fletcher cautioned that this was a 'ten to fifteen year journey' that will only be delivered if there are clear benefits to the community.

The announcement was part of the Government's response to the 'Australian Infrastructure Plan', which was released by Infrastructure Australia (IA) in February. The Plan included 78 recommendations across a broad range of infrastructure issues, of which 69 were accepted by Government.

On road user charging, the Government accepted IA's recommendations to conduct a public inquiry and to commit to the full implementation of a heavy vehicle road charging structure in the next five years. It did not accept the recommendation of a full implementation for light vehicles in the next 10 years, noting that this depended on the outcomes of the inquiry.

While IA recommended that the inquiry be led by either itself or the Productivity Commission, the Government has decided to establish a study chaired by an 'eminent Australian' (yet to be announced). Given the political sensitivities around a major change to our tax base, this is probably not surprising.

The case for change

Roads are currently funded by the Federal fuel excise (almost 40c per litre, and contributing the majority of taxes), State and Territory vehicle registration fees, licence fees and stamp duty. New vehicles are increasingly fuel efficient, or even electric, eroding the tax base provided by the fuel excise. This is resulting in a growing funding gap. To date the solution has generally been to increase vehicle registration fees, however this is not sustainable and disadvantages those who use their cars infrequently.

IA labelled the current situation as 'unfair, unsustainable and inefficient'. Importantly, road users do not currently receive price signals to use the network in the most cost-effective way.

The community challenge

Any change to road user charging will meet resistance from the public. Road usage, with the exception of tollroads, is currently perceived as free. The requirements for GPS vehicle monitoring also raise privacy concerns.

To gain public support, Government will need to increase public awareness of the current methods of funding and the growing inadequacies of those methods, and prove that the benefits of road user charging will outweigh the costs. A recent study revealed that 88% of people had little to no knowledge about the primary funding sources for our roads.

The Government's likely response will be a public awareness campaign, which may include measures such as itemising fuel excise costs on receipts, and highlighting successful international models. Road user charging is already being used in New Zealand, Austria, Belgium, Germany, Hungary, Poland, Russia, Slovakia and Switzerland, with congestion charges in London, Stockholm, Gothenburg and Singapore.

Recent studies

There have been numerous local and international studies into road user charging models. Those models typically involve either distance charges (per KM, based on location), congestion charges (based on time of day or actual congestion) or a combination of both.

Transurban is surveying tollroad users to determine consumer behaviors and preferences. These tests have involved both distance based charges, and congestion charges. Their data to date suggests a willingness from the public to explore user charging, when properly informed, an acceptance of GPS monitoring of vehicle movements and a preference for charging based on distances travelled. A similar study is being conducted in Hawaii, where one million road users are being tested over three years.

Uber, in partnership with Infrastructure Partnerships Australia, is also utilising data from its vehicles to report on relative congestion across the course of each day in major capital cities.

Next steps

With the public inquiry scheduled to start next year, and a 10-15 year timeframe for implementation, the change to a more cost reflective model for road user charging is still a long distance off. Given the mix of road ownership, a coordinated response from all three levels of Government will also be required. However, provided community engagement is managed well, it is looking more and more like a case of 'when' not 'if', for a major change in how we fund public roads.