Fair Move: Better Public Transport Fares for Melbourne

Fair Move: Executive summary

The COVID-19 pandemic has disrupted almost every aspect of Victorians’ daily lives. Stay-at-home orders, social distancing requirements and greater numbers of people working from home mean that public transport use is down and private car use is up.

However, at some point, restrictions on the way Victorians connect and travel will be eased and removed, migration to Victoria will resume and Melbourne’s public transport system will be under pressure again. Instead of drifting back to ‘normal’, there is a unique opportunity to undertake fare reform so that when Melburnians return to public transport, the network is better balanced, better managed and operates more efficiently and fairly for the benefit of all Victorians.

While COVID-19 has hit the Victorian economy hard, it has also created greater flexibility in work and commerce, generating behaviour change that can have lasting benefits once the pandemic has passed (such as reduced congestion from more flexible working hours and increased working from home). A well priced public transport network can help lock in some of those benefits and take pressure off the entire transport network.

Public transport fares fall within the broader transport network pricing framework presented in Infrastructure Victoria’s previous report Good Move – Fixing Transport Congestion.

In that report, we called for pricing of the entire transport system across roads, public transport and parking. We also acknowledged that this would take some time to implement. In this report, we focus solely on public transport fare reforms that could be implemented in Melbourne in the short to medium term.

Melbourne’s public transport system faces three major problems: it is under strain and out of balance (being overcrowded in peak times and underused at other times); fares are not set to  encourage the best use of the system or to give public transport users greater choice about how and when they travel; and the current fare structure is unfair. The system also has limited ‘slack’ to cover disrupted services, meaning that cancellations, problems with vehicles, incidents and other delays quickly ripple out across the network, affecting thousands of commuters. These problems are likely to continue even as Victoria rolls out major new transport infrastructure investments.

Fares are a powerful tool for addressing these problems. Fares can be set to make the best use of the entire transport system (roads and public transport). They can provide incentives for people to change their travel behaviour and make the best travel choices for themselves, as well as for the wider community.

Fare reform can also be fair reform. While the top 20% of income earners make up the largest group of public transport users overall, fare reform can significantly improve travel choice and affordability for low income travellers and households.

We propose a fare structure that maximises the use of the public transport network so that it generates the most benefits to Melburnians, whether they use public transport, private vehicles
or active transport.

Fares make up only a part of the public transport system, but they have the ability to support Melbourne in getting the most out the infrastructure it has today, as well as the infrastructure of tomorrow, such as Metro Tunnel.

Fares, new infrastructure and service reform an all work together to help meet the growing travel needs of Melburnians.

And right now, while the pandemic continues, fare reform can support social distancing by encouraging off-peak travel and better use of underused services, such as buses.

Our recommended reforms

Fares that vary by mode of travel
Introduce different fares for each public transport mode to reflect the different costs and benefits of each mode, and to encourage the best use of public transport services. Fares would be lowest for buses and slightly more for trams, with trains being the highest priced of the three modes.

Currently, buses are overpriced and underused, which impacts people on low incomes the hardest − as trains and trams are used disproportionally by people on high incomes. Our research shows that if buses were cheaper than trains and trams, many people would make the switch to buses.

Fares that reflect the time and place of travel
Introduce peak and off-peak fares on trains, trams and express buses in places and at times that are at capacity. Congestion and the cost of expanding the train network in and around the CBD is greater than the rest of the network, so when CBD public transport travel patterns return to pre-COVID-19 levels, we also propose creating a new ‘City Zone’ on the metropolitan train network, covering the CBD, City Loop and Metro Tunnel.

Having different fares for different times and places would encourage travel in the off-peak periods, making more efficient use of the network and reducing crowding. It would also support social distancing on public transport while the COVID-19 pandemic persists.

Consistent with our transport network pricing approach that all modes and routes should be priced, we also recommend removing Melbourne’s free tram zone. This free zone fails to price travel in a busy tram corridor that is already at capacity. It is also unfair, as it largely benefits a relatively small group of people − those who live in or drive to the CBD − while all Victorian taxpayers foot the bill, regardless of whether they use the free tram zone or not. There is also no evidence that it increases tourism.

Better ticketing
Alongside this new fare structure, we are recommending ticketing reforms to make the system more convenient and fairer, and allow for the introduction of new digital platforms for planning, booking and paying for travel.

Improving how fares are set
Public transport fare setting needs to balance multiple outcomes to make best use of the network and improve fairness. This balance needs to be transparent, using clearly defined objectives determined by the Victorian Government, with an independent body to advise on and monitor transport prices (like IPART in NSW).

To see the effects of fare reform over time, we have modelled how things would look in 2031, comparing the current flat public transport fare structure to one that provides stronger incentives for making better use of the network.

Our modelling was done pre-COVID-19, but the outcomes will hold assuming Melbourne’s transport patterns return to normal. We are currently doing a range of modelling to investigate how COVID-19 might change the travel and land use of Melbourne into the future, and how transport reforms and infrastructure may need to adapt.

We found that the impacts of fare reform would reach all Victorians, whether through reduced road congestion or less crowding on trains, trams and buses or simply through lower pollution and a cleaner environment.

Ultimately, fare reform means that Melbourne’s transport users would be the equivalent of $520 million a year better off in lower cost public transport alternatives, reduced crowding and congestion and better environmental outcomes.

We also found that these benefits can be achieved with little-to-no change in cost recovery levels and fare revenue.

The potential benefits of public transport fare reform we have identified include:

More people using public transport

Substantial shifts to public transport across Melbourne, especially in the middle and outer ring of suburbs.

More people travelling during off-peak

Relieving pressure during peak periods and reducing crowding on trains and trams during peak times, making commuting to the central city safer and more comfortable.

More people using buses

Making buses a more attractive and inexpensive travel choice and getting much better value from Melbourne’s underused bus network.

Fewer cars on Melbourne’s roads

Decreasing traffic volumes along some of Melbourne’s busiest arterial road links, relieving pressure on the road network and reducing vehicle emissions and air pollution.

Most people are better off, especially low income households

Up to 71% of people could pay less to travel on public transport, with people on the lowest incomes paying 26% less for fares on average*. Those who may pay more, such as city office workers who travel into the CBD via train at peak times, would enjoy a more efficient, less crowded and more comfortable service.

* Fare revenue was down in our modelled fare reform. See `How does fare reform change the cost of public transport?’ on page 69-71 for a breakdown of who pays less under an approximation of a revenue neutral-fare reform.

While more extensive fare and ticketing restructuring will take time, two fare changes could be implemented immediately by the Victorian Government: introducing peak and off-peak fares and removing Melbourne’s free tram zone. While the COVID-19 pandemic continues, these reforms would also support social distancing on public transport by spreading demand across the day and across different modes, and reducing crowding on CBD trams.

A third reform that could proceed now is the appointment of an independent adviser to recommend and review transport prices. This would signal the start of a broader reform process and also provide the government with guidance on future fare-setting objectives and the best way to proceed with greater fare and ticketing reforms.

With Melbourne’s public transport network now costing nearly $2 billion to operate each year and fares covering less than 30% of these costs, it is critical to make the best use of this investment by Victorian taxpayers. Introducing the fare reforms recommended in this report would mean that the majority of people would pay less to travel on public transport than they do now, but total fare revenue would be similar. At the same time, the network would be more efficient, more balanced and fairer – producing a better overall return to the wider community and extracting much greater value for all Victorians from their substantial investment in public transport.