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Fair Move: 04 Principles

Infrastructure Victoria first called for transport network pricing in the 2016 30-Year Infrastructure Strategy.

In the same year, we also analysed the case and options for road pricing in The Road Ahead. In 2018’s Five Year Focus, we made a number of research-based recommendations for public transport fare reform.

In March 2020, we provided a comprehensive analysis of transport network pricing in Good Move: Fixing Transport Congestion, including five pricing principles that would set a strong foundation for transport network pricing in Victoria.

Our five pricing principles were distilled from Australian and international economics literature on pricing and are designed to ensure that prices are set to yield an efficient outcome (where people travel at times, to places and by modes that deliver the greatest benefits relative to the costs) while also meeting important equity objectives that are essential to gaining community support.

We have applied these principles to setting public transport fares in this report.

The principles are:

Principle 01: All modes, routes and parking are priced

Prices should be the central tool for allocating trips within the transport network. A trip that isn’t priced is effectively under-priced, distorting the choice made by travellers to take that trip instead of a more efficient one. This principle also implements the beneficiary pays equity principle.[4]

Principle 02: All costs are priced

Prices should take into account all costs and benefits for trips, including road congestion, public transport crowding, pollution, contribution to road trauma and the costs of raising revenue through taxation. This principle ensures that prices include the social marginal costs linked to externalities related to each mode and trip.

Principle 03: Provide choices, but not too complex

There should be a range of products that provide choices to consumers. It should be possible to use the transport system without it being too hard to choose and make informed decisions.

Principle 04: Different prices for different products in different markets

Prices should reflect demand and cost conditions, and permit different prices to be charged by mode, time of day or location.

Principle 05: Equity

This principle implements vertical equity (where different groups of people are treated differently) and also permits different prices to be charged in different locations where possible. Lower prices are set for groups of people identified as less able to pay.

[4] This principle states that those who use (or benefit from) a service should pay the full cost of using that service. Conversely, those who do not benefit should not have to pay.

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