Unscrambling the Toll Road Egg How toll roads locked irrational pricing and options for a more effective approach

AUSTRALIAN LAUREATE FELLOW, UNIVERSITY OF QUEENSLAND JOHN QUIGGIN AUSTRALIAN LAUREATE FELLOW, UNIVERSITY OF QUEENSLAND

ROAds: One of our biggest capital assets Value of Australian road network estimated at $280 billion (Roads Australia) Annual expenditure around $50 billion (Commonwealth and state budgets) 250 billion vehicle/km travelled

HAPHAZard Mix of funding and pricing Vehicle registration charges, unrelated to road use Fuel taxes, a mixture of resource rent tax, general consumption tax, road user charge Local government rates State and Commonwealth general revenue

Toll roads AND PPPs Ad hoc deals to deliver new projects without addition to measured public debate BOOT (Build, Own, Operate, Transfer) model Crucial role of demand risk

THE END of the PPP Model GFC Failures due to over-optimistic demand forecasts Last attempt (Legacy Way) failed to attract sufficient interest Return to public finance Is the model permanently broken? Asset recycling

Objectives for road pricing Cover costs, including return to capital, depreciation and maintenance Price of use should cover marginal costs, including congestion Need to optimise network as a whole, not individual roads Correct balance between private cars and public transport, and between road and rail

Principles for road pricing Two part tariff: fixed registration charge and usage-based charge Network optimisation requires congestion pricing Supplemented by speed limits and physical controls on unpriced local roads

Current policy has it backwards Old congested roads are untolled New toll roads massively underused (around 50 per cent of projected usage in Brisbane) BOOT arrangements mean that, by the time roads are congested, tolls will be due for removal

Unscrambling the egg Comprehensive road pricing based on congestion Buyback or shadow tolling for underused toll roads Focus on better use of existing road network rather than construction of new roads

Technology GNSS road pricing Singapore model Privacy issues: need to be addressed systematically given ubiquity of cameras Implications of self-driving cars ?

Fiscal Feasibility Revenue neutrality: user charge revenue can be used to reduce registration charges Government debt: this is ‘good debt’, Government bond rates at historic lows

Political Feasibility The big question Long standing assumptions about political feasibility are no longer valid’ Labor has advocated raising taxes, still leads in opinion polls Donald Trump is President of the US If not now, when?