Jacob Greber, 10 February 2016

Treasurer Scott Morrison is being urged by the nation’s top motoring and infrastructure groups to hold an urgent inquiry into road-user pricing as an alternative to the current system of funding new highways with petrol excise.

The growing popularity of hybrid and electric vehicles, as well as the inexorable trend towards more frugal conventional engines, means the Commonwealth’s fuel excise revenue base is set to come under significant pressure in coming years.

The Australian Automobile Association, which represents 8 million motorists, and Infrastructure Partnerships Australia, a major think tank backed by both private industry and governments, has urged Mr Morrison to hold a public inquiry into alternative ways of paying for new roads.

A joint-letter by the groups to Mr Morrison, obtained by The Australian Financial Review, describes the current transport funding model – based on a 39¢-per-litre excise that raises more than $15 billion a year – as “ad hoc, outdated, fragmented and lacking in transparency”.

“It is clear that the current funding model cannot deliver the infrastructure required to address increasing congestion across major cities or meet the needs of Australia’s regional communities and industries.”

The automobile association, which represents bodies such as the NRMA and RACV, backs a move to road-user pricing, which could, for instance, see fuel excise and registration fees dumped in exchange for a system in which motorists pay per kilometre, with the charge determined according to location and time of day.

Such a system could undo the effective cross-subsidy of city drivers by rural users, whose higher mileages result in greater outlays for petrol excise.

They said a road-user inquiry would dovetail with a coming report by Infrastructure Australia, which will outline the nation’s main infrastructure priorities for the next 15 years.

An inquiry should aim to highlight problems with the current funding system, “articulate road pricing as a solution”, and “demonstrate how the community would benefit as a result of reform”, they said in the letter.

The groups cited estimates showing that demand for freight was expected to double by the end of the decade and triple by mid-century, while the cost of urban congestion has been forecast by the government to reach $53 billion by 2031.

“The primary objective of the proposed inquiry would be to consider how transport market reform and road user pricing could be linked to land transport infrastructure investment.

“This is particularly important given that the total fuel excise take, the primary revenue source for land transport, is forecast to decline over time as vehicles become more efficient and utilise alternative fuels.”

A spokesman for Mr Morrison said the government recognised the need for microeconomic reform, and was seeking to “accelerate work with states and territories on heavy vehicle reform and investigate benefits, costs and potential next steps of options to introduce cost reflective road pricing for all vehicles.”

Extracted in full from the Australian Financial Review.