2 December, 2016
The Australian government is to commission a study into the "potential benefits and impacts" of different road charging models, including the potential introduction of a 'user pays' model for car and van drivers, it has announced.
Any changes would only be introduced over a 10 to 15 year period, and "would only go ahead if governments are confidence that the benefits to the community of any new arrangements outweigh the costs", the government said, in its official response (68-page / 926KB PDF) to Infrastructure Australia's '15-Year Plan' report.
The Australian government is supporting 69 of the 78 recommendations made by Infrastructure Australia in its report, which was published in February this year. Its commitments will "support our ongoing reform agenda", and build on the government's commitment to invest a record AU$50 billion (£30m) into infrastructure over five years to the end of the decade, it said in its response.
Infrastructure Australia, which provides independent advice on infrastructure to the government, welcomed the government's response, which it described as an "important first step on the journey towards infrastructure reform".
"We are particularly pleased to see the government commit to progressing the important issue of road market reform and developing a National Freight and Supply Chain Strategy," said Philip Davies, Infrastructure Australia's chief executive.
"As we outlined in the Plan, it is clear that the current funding model to build and maintain Australian roads is broken – it is inefficient, unsustainable and unfair. We advocated for fuel excise and registration fees to be abolished, and road users to only be charged for what they use … We recognise that changing how we pay and invest in roads will not be easy and this is a long term process, however a better system could deliver secure, sustainable funding for our roads – and better services for users," he said.
Infrastructure law expert Anthony Arrow of Pinsent Masons, the law firm behind Out-Law.com, said that although there would be no introduction of road user charging in the short term, "history tells us that it is going to take a fundamental shift in the community's mindset to accept any future proposal by the government to reintroduce a user pays road model".
"The Australian experience in relation to tolled or user pays transport projects is not entirely a happy one," he said. "Project company insolvencies, lengthy project delays, major litigation around traffic forecasts and the highly publicised airport link 'greenmailing' fiasco make the prospect of a return by government to procuring transport projects using an economic PPP [public-private partnership] model where project sponsors assume patronage risk unlikely."
"Reintroducing a user pays model for roads in Australia is potentially akin to committing political suicide for any current or future government bold enough to even consider the prospect. The general community sentiment is that governments can, and should, use existing tax dollars to fund transport infrastructure development in a way which does not see individuals forking out more money from their after tax dollars to pay for using the infrastructure," he said.
Although the Australian government's preferred model for funding transport projects since the late 2000s, an 'off balance sheet' availability PPP model, did not appear to provide the same "economic efficiencies" as user pays models, projects developed in this way "have proven to be bankable and have attracted competitively-priced equity from around the world", Arrow said.
In its report, Infrastructure Australia made a number of recommendations intended to address Australia's likely infrastructure needs over a 15-year period. These included consolidating all funding pools into a single infrastructure fund; establishing a road user charging scheme for heavy vehicles, eventually expanding to cover all passenger vehicles; and transferring all remaining publicly-owned electricity networks, water utility businesses and retail businesses into private ownership.
The report was accompanied by an 'Infrastructure Priority List', a prioritised list of the 15 nationally significant investments that Infrastructure Australia believes are needed to "underpin Australia's continued prosperity". The government has already committed money towards 14 of these 15 projects, which include the 'WestConnex' road congestion project in New South Wales and improved public transport access to Perth Airport in western Australia.
The government said that it supported privatising electricity assets in principle, where this "results in greater economic efficiency" and "improved services for the community". However, the decision about whether or not to do so lies with local government at the state and territory level, according to its response. For water assets, it has instead supported a secondary recommendation to improve "economic regulation" and "pricing mechanisms".
Other recommendations accepted by the government are a commitment to work with state governments to develop urban rail plans for Australia's five largest cities and the surrounding regions; and to develop a 'national freight and supply chain strategy' to improve the productivity and efficiency of Australia's freight supply chain.
For further information, please contact:
David Rennick, Partner, Pinsent Masons
david.rennick@pinsentmasons.com
