Coming Soon: Road Pricing and Provision (Book)

Traffic congestion will only get worse and road pricing is inevitable.
Photo © 

While it will not be everyone's cup of tea, roads are the least reformed infrastructure sector in Australia, and some form of road user charges are inevitable. I hope that my forthcoming book (edited with Professor John Wanna), Road Pricing: Changed Traffic Conditions Ahead, will go some way to explaining the need for urgency in road reform.

Michael de Percy and John Wanna (eds).
There are two main reasons for a system of road pricing. First, funding the construction and maintenance of roads is based on projections with little usage data. We don't know how much motorists are prepared to pay for the use of roads, so we don't really know their value.

Second, motorists currently pay taxes, fuel excise (a quasi-user charge) and an access fee (motor vehicle registration) which is not based on road use. There is a form of cross-subsidisation where light road users are paying the same amount (proportionally) as heavy road users.

A system of road pricing provides market signals - we can discover the actual rather than the estimated demand for road usage. Although we pay an access fee, in effect, road users don't actually pay for how they use our roads.

Sure, we have tolls in major cities, and there is some form of road user charge for heavy vehicles, but this neither accurately reflects the extent of road usage nor the damage done to the roads by heavy vehicles.

Road pricing (what they are worth) and road user charging (what motorists will pay) are basically unknown quantities. Many motorists assume that road usage is free (after paying rego), but this is because there is no point-of-use cost to motorists.

Even the fuel excise, which motorists pay at the petrol bowser, is not clearly indicated on fuel receipts. Indeed, motorists with fuel-inefficient cars actually contribute more for their road use than those wealthy enough to afford the latest Tesla or hybrid vehicle. Poor people in general are paying more fuel excise than wealthy people do for the same amount of road use. And the fuel excise is not linked to road funding - it is, in effect, a tax that goes back into general revenue - it is not hypothecated funding.

Previously, the technology did not exist to accurately reflect individual motorists road usage. Those days are long gone. Yet roads remain inefficient, and political representatives are reluctant to tackle an issue that, based on the evidence, is the best way to signal demand, fund, and charge of road use. We do this for everything else: electricity, gas, water, telecommunications, and so on, but not roads.

The distortions in the market mean that it is cheaper to use trucks than it is to use rail for freight. But this is because the externalities - the hidden costs of road use - are not included in the price of road freight. It is interesting that the exact opposite was the case back in the 1950s before State-owned railways, as a result of a Privy Council decision, were forced on to a level playing field with trucks.

I have written about this problem for a few years now. Each time I have, someone has complained about the extra costs they will have to pay. The thing is, motorists are paying for it anyway, either in rego and fuel excise, or for every minute they sit in traffic.

This book is due to be released by ANU Press soon, and includes chapters from several transport policy experts. All are in favour of road reform and road pricing. But the biggest issue is the lack of political will, coupled with a lack of understanding by the average motorist.

I suspect road pricing will be like the introduction of the GST, which, along with the Y2K Bug, appeared like it was going to be the end the world. But the opposite was true. Our income taxes were reduced significantly, the price of many goods decreased after sales tax was removed, and now we consider the GST as part of our normal household expenditure and don't think twice about it.

Road pricing will be the same, but the trick is to convince others that the time has come. I hope this book goes some way to accelerating the implementation of road reform in Australia.