Our congested country – getting in the fast lane
Traffic congestion is one of the biggest challenges facing Australian cities and regions. It affects our liveability, productivity and global reputation as a destination of choice for investment. Despite several independent bodies including Infrastructure Australia, the Henry Tax Review and the Productivity Commission calling for a road user charging scheme for Australia, there has been little action. That has to change – and soon.
KPMG is calling for a trial of road user charging models across the country. In a report we issue today, Unblocking traffic congestion, we estimate that the country’s existing toll roads create an annual $7 billion of economic, social and environmental value per annum.
A well-designed road pricing scheme has the potential to be one of the most effective policy tool for managing congestion. It can help reduce low value travel during peak periods. For example, 21 percent of all trips in the Sydney morning peak hours are for social and recreational purposes. It also provides a valuable additional funding pool for investment in necessary infrastructure.
The underlying principles for road pricing include:
- The current cost of providing road infrastructure does not fully reflect its value to users
- Without pricing, users are not incentivised to reduce road travel in peak periods or to use alternative modes of transport
- Inefficient travel patterns can lead to infrastructure projects being designed to service inflated peak demand, resulting in redundant infrastructure in off-peak periods
- Lack of direct pricing is socially inequitable as all residents contribute the same amount to road funding regardless of personal use
- Lack of pricing also leads to increased ‘externalities’ – users don’t take into account the increased congestion they create for others
- Reduced speeds in heavy traffic result in increased fuel consumption and hence greater greenhouse gas emissions.
The technology and policies for effective road pricing schemes have been tested in cities around the world. What Australia needs is a proper trial to help determine the best pricing regime for each major city. People in our capital cities spend as much time sitting in traffic as drivers in Europe and the US, despite their main cities having much bigger populations. We must get smarter about road usage.
Watch Paul Foxlee share his views on how we must make our infrastructure work harder and more productively.
We estimate that the current 16 toll roads across the country directly contribute $7 billion per year of economic, social and environmental benefits – with the value over a ten-year period being more than $52 billion. Of that, nearly half is productivity-enhancing, so directly improving the quality of Australians’ lives.
KPMG modelling estimates that the country’s GDP is $37 billion higher over ten years due to the operation of these roads. The largest source of benefit is due to travel time savings, followed by vehicle operating cost savings. The third largest source of benefit relates to the changes in accessibility between key transport generators such as employment and residential areas contributing to improvement in labour productivity.
Users of our existing toll roads are able to make value of time trade-offs and therefore influence demand through road pricing. There are various different pricing models internationally and this puts Australia in a good position to learn from experience elsewhere and design the right schemes. The developing network of integrated toll roads in Sydney, Melbourne and Brisbane provide the technology and customer foundation to transition to a comprehensive road pricing regime.
The time for talking is over and as a country, we need to take action.
Paul Foxlee, KPMG National Sector Leader – Transport & Infrastructure.
Read the KPMG Unblocking traffic congestion report.