Direct charging for road users a must, competition review says

By: Brad Gardner

Review of Australia’s competition policy outlines path toward new charging system for trucks.

Direct charging for road users a must, competition review says
A review of Australia's competition policy framework recommends directly charging vehicles for using the road network.


Vehicles in Australia should be directly charged for using the road network, a review of the country’s competition policy framework says.

Professor Ian Harper’s final report on his examination of Australia’s competition laws, released yesterday, implores governments to prioritise the implementation of "cost-reflective pricing".

If introduced, the scheme will charge an individual vehicle based on the roads it uses, the time it travels and the level of congestion. 

Harper says the existing approach that relies on general revenue-raising taxes such as fuel excise, registration and licence fees does not reflect the actual cost a vehicle imposes on the road network or provide information on where investment is most needed.

"Governments should introduce cost-reflective road pricing with the aid of new technologies, with pricing subject to independent oversight and revenues used for road construction, maintenance and safety," the review says.

"Technologies are available that allow for more widespread application of cost-reflective pricing in roads, taking into account location, time and congestion."

Harper’s recommendation is similar to the one in former Treasury boss Ken Henry’s tax review, which supports congestion charging and mass-distance-location pricing for trucks.

A direct-charging proposal was also flagged by the now disbanded Heavy Vehicle Charging and Investment (HVCI) group, which recommended using in-vehicle devices to charge trucks based on their weight, the distance they travelled and the roads they used.

Harper charts a path he says governments should follow to implement his proposed charging regime.

He says pilots and trials should be established within one year of governments agreeing to the recommendations in the review and that existing taxes should be reduced as direct charging takes effect.

"Importantly, direct road pricing need not lead to a higher overall financial burden on motorists since existing indirect taxes should be reduced as direct charging is introduced," the review says.

Furthermore, the review says all revenue raised through cost-reflective pricing should be funnelled into dedicated road funds to ensure the money is spent on road projects.

"Co-operation from all levels of government will be needed to ensure that road pricing does not result in an additional impost on road users," the review says.

"Revenue implications for different levels of government should be managed by adjusting Australian Government grants to the States and Territories."

The review argues the absence of direct charging favours the trucking industry at the expense of rail, while also contributing to congestion because motorists have no incentive to avoid travel during peak periods.

Harper also cites modelling from Infrastructure Partnerships Australia, which claims rural and regional road users will benefit most from a direct-charging model.

"This is because rural and regional drivers typically pay large amounts in fuel excise while imposing little cost on the network in the form of congestion or road damage," the review says.

"There is also a case for part of the road network to be funded from Community Service Obligations (CSOs), which is likely to favour rural and regional residents."

CSOs require government agencies to provide and/or maintain specific services that may not be provided otherwise, such as if they are not profitable.

Harper’s review also recommends changes to laws covering human services, intellectual property, retail trading hours, parallel import restrictions, pharmacies, electricity and gas, water and more.

The Federal Government says the report is the first comprehensive review of Australia’s competition policy framework in more than 20 years.

Australia’s competition watchdog, the Australian Competition and Consumer Commission (ACCC), has been quick to welcome the release of the review and says it supports the findings on road pricing.

"This is a very important report. It sets out many pro-competitive reforms which, if adopted, could significantly enhance economic productivity over the years ahead," ACCC chairman Rod Sims says.

"The panel’s recommendations to expose more sectors of the Australian economy to competition show the considerable scope for reform."

The ACCC says it looks forward to working with the Federal Government as it considers its response to the report.

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