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1. Introduction

Victoria’s transport system is struggling to meet demand and with a growing population, this is expected to worsen in future.

  • Travel is taking Victorians longer. Congestion on the roads and crowding of public transport means longer, less comfortable journeys with increasingly unpredictable travel times. This is expected to cost the state $10.2 billion by 2031.
  • The traditional solution is to build new infrastructure and expand public transport services, but this alone is not enough to ease congestion. To get the most out of our assets, both existing and new, we need a complementary pricing system and a change in people’s behaviour.
  • We need a new approach. Our research shows that comprehensive reform to how we pay for roads, public transport and parking is the single most effective way of reducing congestion and getting the most out of our transport system.
  • As congestion increases in Australia’s growing cities, there are many in industry joining us in a call for change.
  • We have outlined a range of options for government to implement over the short, medium and longer term to make sure we get the most out of our transport system and government investment in expanded services and new build projects.

Victoria's transport system under pressure

Across Victoria, transport services and infrastructure are struggling to keep up with rising demand. As the state’s population continues to grow, we need a new approach to ease the pressure on our roads and public transport services. We need to provide an efficient, well-managed transport network that allows people and goods to move around easily.

Travel is taking longer, with more variable travel times[1]. On public transport, peak travel is more crowded for longer, making travel less comfortable. This reduces the productivity of the economy and amenity for those near transport networks.

Vulnerable Victorians who are less able to travel in crowded conditions, or people who need reliable travel (for example, those with caring commitments), have less access to jobs and amenities.

Investment in transport infrastructure has proven to not be enough to address these problems.

While roads and public transport in inner Melbourne are overused, other parts of the network (such as regional and outer-suburban buses) are underused. In some places, key roads are used for free or cheap parking instead of higher value uses such as bus, tram and bicycle lanes, or wider footpaths. These are all symptoms of Victoria’s underperforming transport network and some of them will only get worse as Victoria’s population increases.

[1] Section 2 of this report provides extensive evidence for the claims below

We need a new approach

Infrastructure Victoria has examined these problems in previous papers and reports. We’ve identified actions to tackle congestion in the short term, including overhauling the bus network, introducing off-peak fares and expanding and increasing Melbourne’s car parking levy.

Transport network pricing was one of the top three recommendations in Victoria’s 30-year infrastructure strategy, published in December 2016. A change to transport pricing will motivate and incentivise people to change they way they use transport.

Our research consistently shows that comprehensive transport network pricing is the most effective solution to reducing congestion in Victoria. Changing the way we pay for transport can reduce congestion and crowding, help us get the most out of our road and public transport networks, and make sure transport investments deliver the greatest benefits to Victorians.

International experience shows that introducing transport network pricing is challenging but possible. Decisions have to be made about what types of journeys will cost money, how much to charge and how to set up and maintain a system that is both efficient and fair. We need community support or at least public acceptance for this system.

This probably means reducing or removing existing charges as we introduce new ones. We need to address privacy concerns and choose the right technology. We also need to set up the right market and governance structures and a smooth way to transition from our existing system to network pricing.

We’ve made transport network pricing a core focus of our research. We want to design a system that’s suitable for Victoria, that’s effective, efficient, fair and sustainable, and that can attract community support.

What is transport network pricing?

Transport network pricing is a system where prices are set to influence how, when and where people use the transport system.

While user charges already exist on some parts of Victoria’s transport network (for example, fares are charged to use the public transport system and tolls apply on some roads) these give people and businesses few incentives to make more efficient choices about transport mode or the time or location of travel.

Currently, there are almost no incentives for public transport users or drivers to reschedule their trips away from peak periods where possible.

Under transport network pricing, prices can be set to encourage people to travel at times, to places and by modes that provide the greatest benefits relative to the costs. Prices can also be set to reflect externalities, such as the costs of air pollution and road trauma.

Importantly, transport network pricing can also incorporate measures to ensure fairness.

Many voices are calling for transport pricing reform

As congestion increases in Australia’s rapidly growing major cities, more groups are calling for congestion charges and greater use of transport network pricing.

Grattan Institute — 2019

Citing international evidence that `congestion charging works’, Terrill et al. (2019a) recommends a cordon charge around the Sydney and Melbourne CBDs, which could mean up to 40% fewer cars entering the CBD in the morning peak periods and improvements in car travel speeds across the citywide road network. This will be more efficient and effective than continuing to rely on a massive infrastructure building program that costs millions of dollars.

City of Melbourne — 2019

The City of Melbourne is calling for efficient, equitable transport pricing (City of Melbourne, 2019). Priority outcomes sought in the council’s Transport Strategy 2030 include advocating for a road user pricing system and supporting effective public transport pricing to manage demand.

Infrastructure Partnerships Australia (IPA) — 2019

IPA has called for distance-based road user charging for electric vehicles ahead of a potential decline in revenue from the fuel excise (Infrastructure Partnerships Australia, 2019).

Productivity Commission — 2017

Continuing to push for road pricing reform in its Five-Year Productivity Review, the Commission restated its call for broader road pricing along with the phasing out of current road-related fees and charges (Productivity Commission, 2017).

Infrastructure Australia — 2016

Infrastructure Australia called for a public inquiry into road user charging in its Australian Infrastructure Plan (Infrastructure Australia, 2016).

What does transport network pricing offer Victoria?

Infrastructure Victoria’s research and analysis – and our review of transport pricing around the world – shows that a well-designed transport network pricing scheme can:

  • Reduce congestion and crowding as travellers who can make low value trips are encouraged to shift to other modes or times of travel to save money, freeing up the system during peak periods.
  • Get the most benefits from the transport infrastructure currently being built.
  • Postpone the need for expensive and disruptive large-scale infrastructure projects as we make better use of the infrastructure we already have.
  • Make it more likely that our major transport investments are the most efficient choices.
  • If combined with governance reform, provide a funding source to improve the financial sustainability of the existing network, reducing pressure on general revenue.

To summarise, transport network pricing helps us make better use of our transport network – which enables us to spend our time and money on better things than being in transit.

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