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2.3 Steer changes in travel behaviour

In 2015, congestion cost Victorians over $4.6 billion and was set to more than double by 2030. This would cost Melburnians an extra $1700 each year, compared with an efficient transport network.1 While the COVID-19 pandemic temporarily paused congestion, Melbourne experienced a swift return to busy roads, with some even more congested than before.2

When many people want to travel at the same time, using the same transport infrastructure, conditions rapidly become congested, slowing speeds and generating crowding for everyone.3 For example, Victorian morning peak hour public transport commuters experienced crowding for 20% of their journey on average in 2018, and Victorian motorists travelled in congested conditions for 22% of their morning commute.4 Meanwhile, many roads and public transport services are underused outside of peak periods and on weekends, and some even during peak periods, such as suburban bus services.5 By encouraging people to travel at a slightly different time, or choosing different travel method, Victorians can get more value out of the transport system and reduce congestion.

Many factors affect people’s travel choices, including the options available, and their cost, speed, convenience, comfort and safety. This strategy makes many recommendations about improving transport infrastructure and services, including for walking, cycling, buses, trams, trains and roads. Transport pricing is another tool to influence people’s transport choices, but is not being used for maximum effect. Transport prices, such as public transport fares, vehicle registration costs or road tolls, affect the financial costs of different transport options, and influence the way people view the relative costs and benefits of travel at different times or using different modes.

People do not often consider the impact of their individual travel choices on others. When people choose to travel at busy times on crowded public transport or congested roads, they make the problem a little worse for everyone else. This costs everyone extra time and money. Good pricing of transport is the simplest way of helping people include their effects on others in their decision-making. For example, people can be rewarded for choices that help reduce congestion by charging lower prices at times or on modes with spare capacity. This maximises use of existing infrastructure, and minimises the amount of extra infrastructure needed.

Better transport pricing has been a focus of Infrastructure Victoria’s work program during the past four years, and our research has documented its considerable benefits using enhanced modelling, international case studies and direct consultation with the community. We have published two research papers, Good move: fixing transport congestion and Fair move: better public transport fares for Melbourne to detail our findings.6 The modelling done for these reports was conducted pre-the COVID-19 pandemic, but the outcomes will hold assuming Melbourne’s transport patterns return to pre-COVID-19 pandemic levels. We also investigated the short-term impacts of the COVID-19 pandemic in our report Transporting Melbourne’s recovery.

That report highlighted that better pricing transport networks could improve transport use during the pandemic. For example, lower off-peak fares will make travel on public transport safer by reducing crowding and enabling physical distancing. We are currently doing extra modelling to investigate how the COVID-19 pandemic might change the shape of Melbourne.

Many factors affect people’s travel choices and this strategy makes recommendations about improving existing transport infrastructure and services to change travel behaviour. This includes for walking, cycling, buses, trams, trains and for road users, including cars and motorcycles.

Our transport network faces major challenges

Without action, pressure on Victoria’s transport network will worsen as population grows. Trips will become longer, less comfortable and more unreliable, costing people and businesses time and money.

This pressure will be largest in Greater Melbourne, where an extra 3.6 to 6.5 million trips are projected to be made every day on roads and public transport by 2036.7 Road congestion could cost Victoria $10.2 billion by 2031 as drivers face longer journeys with increasingly unpredictable travel times.8

Congestion and overcrowding on public transport mean longer and more variable travel times, resulting in frustration and lost productivity.

Even with the Melbourne Metro Tunnel project, modelling indicates many rail lines could become overcrowded,9 and more than 30% of public transport trips could be undertaken in crowded conditions by 2046.10

Inferior public transport performance will lead to more people choosing to travel by car, which, in turn, creates even more congestion. Traditionally, Victoria supported a growing population by building more transport infrastructure. Victoria will still need targeted investment to efficiently move people and freight. But solely expanding roads and public transport may only temporarily relieve congestion, because providing more transport capacity also creates extra demand.11 While extra capacity initially improves travel times and reduces congestion, eventually they increase as more people use the new infrastructure. Every new major road in Melbourne has become regularly congested during peak times.12 Similarly, extra public transport infrastructure has temporarily increased capacity at peak times and reduced crowding, but congestion problems soon return. Building new infrastructure will not be enough to solve transport congestion problems without other changes.

Current prices do not reward beneficial travel choices

Victoria’s current transport prices provide few rewards for people to make travel choices that consider their effect on others. Most motorists pay a set of fixed charges (including registration, accident insurance, and stamp duty) regardless of how much they travel, and pay fuel excise levied by the Australian Government. Fixed charges mean drivers pay the same amount no matter how often they access the road network, and do not reflect all the costs of road infrastructure – including congestion, air and noise pollution, carbon emissions and road trauma. Road congestion is exacerbated by Melbourne’s large amount of free or cheap on-street parking.13 This encourages drivers to cruise for parking, contributing to congestion, and preventing other, potentially better uses of valuable land – for instance, for bus, tram and bicycle lanes, wider footpaths or even green space.14

Cheap parking also discourages people from walking or cycling to reach public transport.

Similarly, while public transport operating costs vary by mode, distance travelled, and time of day, Melbourne’s public transport fare structure does not reflect these costs. The common fare structure across most modes of public transport means that some modes are underused, like buses, while others, like trains, are overused. The simplistic fare structure also means people making short trips on cheaper modes are cross-subsidising other travellers. While some concession fares are available, vulnerable Victorians who are less able to travel in crowded conditions, or people who need reliable travel (for example, those with caring commitments), are less able to use public transport to access jobs, services and amenities.15

Transport network pricing is one of the most effective ways to ease congestion

Our research shows that comprehensive pricing reforms for roads, public transport and parking is the most effective way to reduce congestion and get the most from the transport system. Transport network pricing16 would replace fixed upfront charges and uniform fares with flexible prices set to encourage travel at times, to places and by modes that generate the greatest benefits relative to costs, taking the impact of an individual’s use on others into account. A person’s travel decisions can be affected by multiple considerations, including changes in preferences potentially arising from the COVID-19 pandemic. A comprehensive transport network pricing scheme can also consider other costs, such as air pollution and road trauma, and could incorporate fairness measures.

Encouragingly, Victorians are increasingly open to changing their behaviour, with one in four people saying they could change the time or mode of travel if conditions were right.17 More voices are calling for congestion charging and more use of transport network pricing, including Infrastructure Australia,18 Infrastructure Partnerships Australia,19 the NSW Productivity Commission,20 the Grattan Institute,21 the NSW Review of Federal Financial Relations,22 the City of Melbourne23 and the Committee for Melbourne.24

Transport network pricing is not a new concept. Other cities have effective road pricing regimes, including London, Stockholm, Milan and Singapore, where it has reduced congestion, improved average car speeds and decreased emissions.25

The Victorian Government has begun to change transport pricing systems. The Melbourne inner city parking levy has taken about 3900 vehicles out of the morning peak by reducing long-term, off street parking spaces. By comparison, accommodating 3900 vehicles with a new freeway would likely cost over $1 billion.26 The Victorian Government has started a trial of discounted off-peak public transport fares. They have announced congestion-charging tolls on the West Gate Tunnel project, and a distance-based charge for electric vehicles. These initiatives are positive steps toward transport pricing reform. Further complementary pricing changes can help change the travel choices of Victorians to prevent more congestion and deliver a better travel experience for everyone. It also helps generate the most value from new transport infrastructure investments by preserving their benefits, instead of induced demand eroding those benefits over time. For example, a combination of off-peak and lower fares, improved public transport services and road user charging can encourage more people to use public transport.

Priority reforms work together for greatest effect

Planning for change now can reap the benefits of changed behaviour and avoid unnecessary costs. It also gives people greater certainty, so they can make choices about the most efficient and cost effective ways to travel.

Implementing further transport network pricing is challenging and will take time. Through extensive research, modelling, consultation and community engagement, Infrastructure Victoria identified several prompt steps to deliver long-term, sustainable change. The following recommendations complement each other. They also complement our recommendations on improving services.

and transport infrastructure as the benefits from these investments will be even greater with pricing reforms.

Over time, these reforms can reduce crowding and congestion. They are all steps in moving to comprehensive transport network pricing across all travel modes, including parking, which encourages a more efficient and equitable transport system. Governance reforms will need to support implementation of transport network pricing. Early introduction of an independent adviser to monitor, review and advise on pricing in the system can make the transition and proposed reforms better.

Recommendations to steer changes in travel behaviour

Infrastructure Victoria makes the following recommendations to drive changes in travel behaviour. Table 2 summarises these recommendations and sets a suggested timeline for their implementation.

Table 2: Timing of proposed transport network pricing reforms.

Table 2 Timing of proposed transport network pricing reforms

Recommendation 45: Adopt permanent off-peak discounts for public transport fares

Permanently adopt discounted off-peak fares for metropolitan public transport and discontinue ticket types that do not offer discounts for off-peak travel.

Charging lower fares during off-peak periods can encourage more people out of cars and onto partially empty public transport services. It can also help reduce crowding on public transport during peak periods by rewarding people who travel at quieter times. Less crowding in peak periods helps improve reliability, because passengers can be accommodated on other services during a failure or disruption, allowing people to complete their journey without extensive delays.

Infrastructure Victoria investigated the structure and pricing of public transport fares in Fair move: better public transport fares for Melbourne.27 Our research found that encouraging more people to travel on public transport outside peak hours has higher net benefits than doing so during peak periods, and should be priced accordingly. Our modelling showed that fares that vary by time of day as well as mode of travel would result in 96,000 fewer car trips each day and remove 78,000 tonnes of greenhouse gas emissions each year. It would also result in less crowding on peak hour train services and create an extra 100,000 off-peak public transport trips each day. Lower fares were also shown to benefit those on low incomes the most.

Before the COVID-19 pandemic, Victoria’s public transport was overcrowded during peak periods and underused the rest of the day, as shown in Figure 13. During the COVID recovery, physical distancing is more difficult on some peak services, while off-peak services have ample capacity. In response, the Victoria Government is trialling discounted off-peak fares and increasing off-peak services.28 This also supports embedding positive new behaviours, such as more flexible start and finish times for work during the pandemic.

The Victorian Government should continue to develop and permanently adopt discounted off-peak public transport fares to help manage road congestion and demand on crowded public transport services, and to take advantage of changes in workplace flexibility.29 The off-peak fare discount needs to be big enough to encourage people to change their travel behaviour, and in our modelling the discount was 50%. The Victorian Government can refine the exact hours and conditions of off peak discounts to better support people to make changes to their travel behaviour to benefit everyone, and so fares are simple enough to understand intuitively. Not all sectors of the public transport network need time-specific fares. For example, most suburban bus routes would benefit from low fares at all times of the day (see recommendation 46).30

The current public transport fare system offers different payment options, including a ‘myki pass’ which gives users unlimited travel over a specific number of days.31 But the fixed price means myki passholders receive no reward if they shift their travel outside peak hour. The Victorian Government should ensure everyone is rewarded if they choose to switch their travel outside peak periods. It can do this by discontinuing fixed fare myki passes, and reviewing daily fare caps. These changes create more opportunities for people to save money by changing their travel patterns. Removing fixed-price ticket types is also fairer, as larger upfront costs make accessing them more challenging for Victorians on low incomes. It also simplifies ticketing choices, reducing the documented problems of Victorians choosing the wrong ticket for their journey, and ultimately paying too much.32

Figure 13: Melbourne’s public transport use is highest in peak periods. This graph shows public transport use patterns in 2018.

Figure 13 MelbourneOCOs public transport use is highest in peak periods 300dpi 2
Source: Department of Transport, Victorian Integrated Survey of Travel and Activity (VISTA), 2018

Recommendation 46: Reduce bus and tram fares

In the next year, reduce bus and tram fares, while maintaining an integrated ticketing system, to encourage people to make greater use of cost-effective public transport services that can be quickly expanded.

Distinct types of public transport have different costs and benefits. This includes the different costs of building infrastructure, buying vehicles, and operating the services. It includes the differing benefits of public transport use, like reducing traffic congestion, air pollution, and injuries from road crashes. Reducing bus and tram fares can help encourage people to catch underused services more often, which can be quickly and cheaply expanded to carry more passengers.

Our analysis in Fair move: better public transport fares for Melbourne showed that tram capacity can be added relatively cheaply compared with trains, and still significantly reduces car use and associated road congestion. Lower tram fares better reflect the short trips overwhelmingly taken by tram users, the lower cost of providing extra trips, and the congestion reduction benefits.

We also found that relatively high bus fares discourage people from catching buses. Melbourne’s bus system is currently underused. Many buses run largely empty and can provide extra journeys with low infrastructure costs and high social benefits.33 Infrastructure Victoria’s modelling showed that by making buses cheaper,34 they would carry around 93,000 extra people each day.35 We also estimate that 70% of bus routes run at below a third of their capacity during the morning peak. The average bus route is only 25% full during the morning peak period, while over 80% of train and tram routes are full.36

Adding more frequent and direct bus services can help attract passengers by offering faster, more convenient, and more attractive services (see recommendations 57 and 58). If a short bus trip, such as to the local shops, costs the same as a long peak period train service from suburban Melbourne to the city, even frequent local bus services will struggle to attract passengers.

Lower fares encourage more people to use buses, generating extra patronage to strengthen the case for better, more frequent services. In turn, better services can more easily attract more passengers at a lower price. Expanding the bus network is among the most cost-effective ways of expanding Victoria’s public transport capacity – but only if people catch them. Lower bus and tram fares also improve equity and fairness while giving consumers a more attractive alternative to driving their car.37 Our research shows that buses are overwhelmingly used by people on lower incomes, compared with other modes. Reducing bus fares improves public transport network efficiency, and also benefits people on the lowest incomes the most.38 Buses are the most available public transport mode in heavily car dependent outer suburbs, and encouraging extra bus trips helps reduce reliance on cars and eases traffic congestion.

The Victorian Government should reduce bus and tram fares to attract more people to use public transport on service types which can be easily expanded. The fare structure should continue to have a level of integration for multi-modal trips, such as by not charging people extra for a bus trip that connects to a train service.39

Figure 14: Lower income earners are more likely to use buses in off-peak periods.

Figure 14 Lower income earners more likely buses off peak 300dpi 1
Source: VISTA 2018, Infrastructure Victoria analysis of bus patronage

Recommendation 47: Remove the free tram zone

In the next year, remove the free tram zone to improve equity, enhance the performance of the tram network and provide better safety and transport access for those most in need.

Melbourne’s free tram zone includes the busiest tram corridor on the world’s largest tram network, running a tram each way every minute for most of the day.40 Yet many city tram services are crowded preventing access for older Victorians, people with a disability, pregnant women, and parents with prams and young children.41

These same Victorians have the greatest need for better mobility from trams. Free fares encourage extra people to crowd onto trams in the busiest section of the network and exclude those most needing the service. The free tram zone also encourages people to catch a tram instead of walking or cycling short distances,42 reducing the health benefits generated.43 After the zone was introduced, tram passengers increased by 30%, but the average fare paid fell by 18%, reducing total fares collected.44 The free tram zone also increased delays at tram stops by 7% to 38%, requiring the scheduling of extra time into timetables. The free tram zone is also inequitable, as people who live in, stay in, or drive to the zone benefit most. Most Victorians don’t benefit from it at all. People who drive to the city centre and residents living near free tram zone stops have above average incomes.45 The zone also privileges some retailers and businesses over others. Rather than free fares for a small fraction of inner-city tram trips, lower fares for all tram trips would make better use of the entire tram network and be more equitable (see recommendation 46).

Some argue the free tram zone benefits Melbourne’s tourism. But we found no evidence that free public transport increases tourist numbers, or even that general public transport performance substantially affects tourist satisfaction.46 Creating an easy to use ticketing system can help visitors use public transport to reach all Victorian attractions, and not just those in the centre of Melbourne. For example, the Victorian Government can expand the capability to use mobile phones in the ticketing system and allow direct use of credit cards to touch on and off, as is available in Sydney.47

The Victorian Government should remove the free tram zone, charging for trips there like any similar part of the public transport network. An exception should be the City Circle Tourist Tram, which serves a different purpose and is a genuine tourism facility. Reintroducing fares for travel within the free tram zone will reduce crowding, encourage active transport, and make trams more accessible and comfortable. It will also improve the performance of the tram network by reducing delays caused by the extra time taken by passengers getting on and off heavily crowded trams.

Recommendation 48: Appoint an independent transport pricing adviser

In the next year, appoint an independent body to advise on and monitor transport prices over the next 30 years.

Transport charges in Melbourne have largely fixed, flat structures, if they exist at all. They have not been designed with any specific objectives, such as to reduce congestion and crowding, they do not encourage the most efficient use of the transport network, nor do they support fairness. This is largely because current transport prices have accrued over time from disconnected, unplanned and incremental decision-making, without any consistent guiding direction, principles or policy rationale.

As soon as is feasible, the Victorian Government should appoint an independent body to advise on transport prices to help achieve better outcomes from pricing decisions. An independent adviser can encourage prices to be regularly adjusted to respond to changing needs as Victoria continues to grow. By having an independent adviser, Victoria’s transport pricing decisions can become more coherent, and clearly identify the benefits the pricing system is trying to produce. The adviser should consider many factors in determining prices that will most benefit society, such as congestion and improving transport access. It could also include social and environmental benefits such as lower pollution levels, increased physical activity and reduced road trauma. In New South Wales, maximum fare increases are set by the Independent Pricing and Regulatory Tribunal.48 The Essential Services Commission in Victoria already approves changes to taxi fares and may be well positioned to take on this role.

An independent body can advise on changes to transport prices such as public transport fares (recommendations 45, 46 and 47), road tolls (recommendation 51), congestion charges (recommendation 52 and 53) and even parking fees (recommendation 48 and 49). The independent adviser could encourage government agencies to explain how their pricing proposals achieve specified outcomes, making the process more transparent. Input and advice could also be provided when pricing reforms are being designed. The suite of transport network pricing reforms we propose are not reliant on having an independent transport pricing adviser. However, the reform process will likely be more effective and have greater public acceptance with an independent body in place. A community panel convened by Infrastructure Victoria said there should be an independent body for pricing to ensure accountability, transparency and adequate community consultation when proposing a change to transport pricing.49

Recommendation 49: Reduce inner Melbourne congestion by further reforming parking pricing

Within the next two years, review the Melbourne Congestion Levy on parking to increase its value, expand the properties it applies to, and cover a wider area. In the next five years, consider extending the levy to on-street parking and supporting a trial of demand-responsive pricing for inner Melbourne on-street parking.

The Melbourne Congestion Levy aims to reduce traffic congestion in central Melbourne by encouraging alternatives to driving and parking, including public transport, cycling, and walking. The congestion levy is charged each calendar year to private and public off-street car parking spaces in specified areas.50

The congestion levy has reduced the supply of long-term car parking spaces. Expanding the levy is likely to result in further reductions,51 while also reducing traffic congestion by encouraging more people to travel by public or active transport. Applying the levy to more parking spots could achieve the same congestion reduction as a larger price increase.

Expanding the area covered by the congestion levy would provide benefits in other locations. For example, areas east of Hoddle Street and inner Melbourne suburbs such as Richmond, South Yarra, Windsor and Prahran are also significantly congested,52 and have good public transport alternatives.

A further shift to public or active transport could be achieved by extending the congestion levy to on-street parking. This is likely to prompt local governments to re-evaluate how they price and provide parking. Spaces withdrawn from on-street parking can create more room for through traffic or be reallocated for cycling, walking or other uses (see recommendations 38 and 39). As with other measures designed to reduce the amount of driving during peak times to central Melbourne, an increase in the levy is unlikely to have significant negative equity impacts because peak period drivers to the city centre tend to have above average incomes.53 The Victorian Government should: 

  • Charge a higher rate of the levy \ Apply it to a wider range of properties
  • Expand its coverage to include areas east of the current zone including Richmond, South Yarra, Windsor and Prahran
  • Establish revenue sharing arrangements with each local council subject to the levy
  • Consider applying the levy to on-street parking.

Trialling dynamic parking pricing is another way to better manage on-street parking. Dynamic parking pricing varies prices over time and between locations to manage demand. San Francisco has successfully trialled and implemented this approach. Demand-responsive dynamic parking prices are set to achieve an occupancy target and eliminate cruising for parking. The system adjusts prices on each city block to achieve occupancy rates of 60% to 80% during defined pricing periods, rather than charging the same hourly rate all day.

The City of Melbourne has expressed interest in a pilot study of dynamic parking pricing and recognises the significant productivity benefits of parking technology to facilitate dynamic pricing.54 The Victorian Government should support and encourage the City of Melbourne to conduct such a trial.

Recommendation 50: Price parking at major public transport hubs

In the next five years, charge parking fees at major public transport hubs, followed by all train stations and park-and-rides, to help encourage people to travel there using public and active transport, and to make parking spaces available for public transport users who need them most.

Train stations and park-and-ride facilities have free parking. It is available on a first come, first served basis, and most car parks fill up very early on weekday mornings. This means people miss out if they cannot get to a parking spot very early, due to other commitments, such as caring for others or taking children to school. Free parking encourages some people to drive rather than walk, cycle or catch a local connecting bus to reach their transport hub and encourages overuse of valuable land for carparks.

Charging for parking helps solve these problems.55 It encourages people to walk, cycle or catch a bus to their train station or transport hub, freeing up space for others. It also complements our recommendations to encourage walking, cycling and catching buses (see recommendations 38, 39, 57 and 58). It means parking will fill up less quickly, so people who must drive can park later in the morning.56 With fewer parking spots needed, people may put less pressure on governments to spend taxpayers’ money to convert valuable land into more carparks.

The Victorian Government should charge for parking at all transport hubs in the next five years, preferably guided by advice from an independent pricing adviser (see recommendation 48). This pricing should begin at large, well-connected, and accessible public transport facilities in inner Melbourne train stations. For example, Footscray train station features good local public and active transport connections. This allows transport planners to work out the best models to eventually apply to other train stations and park-and-ride facilities.

The Victorian Government should set parking fees so some parking spots remain vacant for much of the morning peak, meaning people arriving later can still park there. This also assists people choosing to work more flexibly, or take advantage of off-peak fares (see recommendation 45). The price required will vary from place to place, while parking outside peak periods should attract a lower fee. We recommend a trial of demand-responsive pricing for on-street parking in inner Melbourne (see recommendation 49). It could also be considered for parking fees at train stations and park-and-rides. Another option is allowing people to pre-book spaces, like the Park & Ride booking system in NSW, which allows people to reserve and be assured of a parking space, rather than try their luck on a first come, first served basis.57

Options also exist to only allow people who use public transport to park in these facilities, or to charge a much higher rate for those who are not using public transport, as is the case in Perth and pre-booked commuter parking in NSW.58 Potential negative equity impacts of charging parking fees may be reduced by applying the same concession card discounts used for public transport. Some free parking spots should continue to be reserved for select public transport users, such as people with a disability.

Recommendation 51: Incorporate congestion pricing for all new metropolitan freeways

Apply congestion based peak and off-peak tolling to all new metropolitan freeways, including the North East Link, to better manage traffic flow and impacts on nearby local roads.

Road congestion occurs across Melbourne’s freeways and major arterial roads, and it will worsen as the city grows. Broader transport network pricing reform can help manage these problems. Victorians are used to making choices that involve balancing quality, convenience and price in other forms of travel, including ride sharing, airfares, and accommodation.59

Applying congestion reducing tolls to new metropolitan freeways means traffic will flow more freely and reduces time spent travelling in peak periods. Low off-peak tolls may also attract traffic from parallel arterial roads, improving amenity for nearby residents. The Victorian Government has already proposed congestion-managing tolls for the West Gate Tunnel project, where vehicles exiting to the city centre in morning peak periods would be charged a higher price.60

The Victorian Government should extend congestion pricing to plans for new freeways in Melbourne. It should design the charges to manage road congestion and optimise the use of this new infrastructure. Tolls should be lower in off-peak periods, possibly with intermediate tolls during the shoulder periods to avoid abrupt changes. Tolls would also need to consider traffic impacts on nearby roads. For example, an excessive peak toll charge on the North East Link could result in too much congestion remaining on Greensborough, Rosanna, Lower Heidelberg, Manningham and Bulleen Roads, which also connect the Western Ring Road and Eastern Freeway. A well-priced peak toll balances these traffic management challenges while offering a lower toll at times when the freeway is underutilised. This will encourage some users to shift their time of travel to off-peak times, and others to get off local roads and onto the freeway during the day.

Significant negative equity impacts are unlikely as peak period traffic is mainly for driving to and from work.61 Lower prices in off-peak periods may have positive impacts for those on lower incomes. Road tolls could also receive concession discounts, like public transport. Concessional road use should still face peak and off-peak prices – just at lower rates than other drivers. This would preserve incentives for low income Victorians to drive during off-peak rather than in peak periods.

Recommendation 52: Trial full-scale congestion pricing in inner Melbourne

In the next five years, trial full-scale congestion pricing in inner Melbourne to reduce congestion on inner city roads.

Road congestion means longer journeys with increasingly unpredictable travel times. Inner Melbourne experiences the city’s worst congestion, and easing it will yield considerable economic and social benefits.62 The current transport pricing system does not reflect the delays and costs that vehicles impose on other road users and society.63 International evidence, such as from London, Stockholm and Milan, shows introducing congestion pricing has a sustained effect on reducing congestion.64

The Victorian Government should conduct a full-scale congestion pricing trial in inner Melbourne within the next five years, in anticipation of broader application. Private vehicles entering a cordon during peak hours would be charged a toll. The toll should be set to achieve targeted minimum vehicle speeds, on average, on major roads within the cordon. These speeds should be monitored so if they are regularly exceeded, the tolls can be reduced. If speeds regularly fall below the target average speeds, the tolls should be raised. This could be done once a month or once a quarter to give motorists some certainty about the charges they face. For example, tolls are likely to be lower during the summer holidays when traffic in inner Melbourne is lower. The peak hours to which tolls apply could be set in a similar way. For example, if average speeds slow too much earlier than the defined peak period, then the peak period should be changed so tolls apply earlier. This road congestion pricing trial would accompany pricing reforms in public transport (see recommendations 45, 46 and 47), and parking (see recommendations 49 and 50). The trial could be supported with advice from the independent transport pricing adviser (see recommendation 48).

Choosing the right boundary for a toll cordon will depend on the costs and benefits of managing demand in different places. We modelled a scenario with a cordon bounded by CityLink, the West Gate Freeway, Punt Road and Alexandra Parade.65 The Victorian Government can establish a cordon at relatively low cost using a license plate recognition system, or a GPS-based system like that being introduced in Singapore.66 Our research suggests congestion pricing can increase vehicle speeds within the cordon by 25%, and means motorists can reduce their time spent in congested peak hour traffic by around 8% each day, on average.67 Significant negative equity impacts are unlikely, as drivers to inner Melbourne typically have above average incomes.68

A trial of congestion pricing will also require good public transport options.69 The Victorian Government could expand services to cater for increased demand on certain routes due to the new road congestion charge, such as providing more tram services (see recommendation 42). London and Stockholm increased public transport services when successfully introducing similar road pricing schemes. Discounted off-peak public transport fares (see recommendation 45) will also encourage off-peak travel and reduce the need for extra services.

Trials also help develop community acceptance of transport pricing. This was evident in the Stockholm experience and with Infrastructure Victoria’s transport network pricing community panel, which stipulated pricing schemes should be trialled before implementation.70

Recommendation 53: Phase out fixed road user charges and introduce user pays charging

Replace fixed road user charges with variable distance-based and congestion charges over the next 10 years, by gradually expanding and reforming the existing electric vehicle charge. Ensure user pays charging reflects the relative costs of road use, encouraging people to adopt beneficial travel behaviour.

Victorian motorists typically pay fixed road charges regardless of how much they travel, such as for vehicle registration and stamp duty charges.71 People pay the same whether driving hundreds of kilometres each week or making infrequent trips to the shops, or whether they drive in inner city peak hour traffic or the regions mid-morning. These fixed charges do not reflect the relative costs of providing road infrastructure, the costs of congestion, air and noise pollution, carbon emissions, and road trauma.

Victoria’s fixed road user charges do not reward people for making transport choices that benefit others. They do not encourage people to consider changing the time of day, destination, mode, route, or quality of their journey. This means not enough people are strongly motivated to change their travel patterns to help prevent worsening congestion.72 We found that introducing user pays and congestion charging could lead to up to 168,000 fewer car trips every day, and almost halving car trips in inner Melbourne.73

In the next 10 years, the Victorian Government should phase out existing vehicle and road charges. They should be replaced with charges that incentivise drivers to better use Victoria’s roads. For example, the Victorian Government can use its existing distance-based electric and hybrid vehicles reform as a transition strategy for all other vehicle types by further reducing fixed fees in exchange for distance-based charges. Once in place, drivers can expect less congestion and more predictable travel times. This will also likely reduce greenhouse gas emissions and improve road safety. The Victorian Government’s zero and low emission vehicles road user charge is a promising step in this direction.74

Charges should reflect the relative costs of building and maintaining roads, congestion, carbon emissions, air and noise pollution and road trauma.75 They should vary by time of day and location. Because different vehicle types contribute differently to each cost, charges should also vary by vehicle type.76 For example, vehicles contributing less air and noise pollution, like electric vehicles, should be charged less.77 Vehicles that contribute more to road damage, such as large trucks, should be charged more.78

To motivate people to make beneficial transport choices, road user charges should ultimately combine a distance charge and a congestion charge at the times and locations of road congestion.79 Low income and vulnerable Victorians can receive discounts on road user charges, like those for public transport. Designers can also consider the implications for those living more remotely and the fairness of the system. To support this, an independent transport pricing adviser should review the road user charges (see recommendation 48).

Some of our other recommended reforms, such as applying congestion charges to new freeways (see recommendation 51), are building blocks toward this broader, integrated system. They can prove the benefits of congestion charging and offer lessons for the design of road reforms.

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