It is obvious that state governments in Australia are fearful of pricing road use. This is so even though it is almost universally acknowledged that such policies make sense in terms of generating efficiency gains through reduced congestion and more effective use of roads by heavy vehicles. The backlash that the Brumby Government received from its decision to price EastLink and the fact that the NSW Government refuses to even call the time-of-day pricing it has introduced on the Sydney Harbour Bridge ‘congestion pricing’ suggest a particular lack of spinal strength in our state politicians that will condition our road transport policy possibilities.
This article in the Sydney Morning Herald shows that local governments at least approve of road pricing of the type David Prentice and I have advocated. Local government want the ability to levy road use charges to strengthen their revenue base. Whether this should be given to them depends on the abilities of regulators to prevent local holdups of long-distance heavy vehicle transport – the ‘last kilometer’ problem – from emerging. My guess is that many state and Commonwealth transport policy designers believe road pricing and supply decisions should reflect broader regional interests rather than those of local government.
But the general argument made me think about intergovernmental deals that might facilitate the pricing of roads by offering to local and state governments a secure additional revenue source or a revenue source that replaces other dumb charges. Everyone agrees that stamp duty charges on such things as housing transfers are the dumbest sort of tax imaginable – they restrict labour market mobility and make it unnecessarily difficult for citizens to change their housing when their circumstances change. Is there a better alternative?
One option would be to allow the states to retain most of the revenues from registration charges but to replace at least some of the $10b petrol excise that accrues to the government with user charges on congestion and heavy vehicle use that would accrue to the states and local government rather than to the Commonwealth. The states and local government could plead that the user charges themselves were the result of Commonwealth Government attempts to improve efficiency (its not our fault!) and could minimise their own sense of political discomfit with such charges by looking at the piles of loot that they would collect from user charges. I don’t think the Commonwealth would lose a lot of sleep by handing over $10b in revenues to fund about $10b in road construction and repair costs that would, in any event, mostly originate with the states and local government.
Transport economists would be happy since we would all end up with a more efficient transport sector with, if anything, an efficiency dividend passed on to drivers. State governments acting alone might be reluctant to implement user charges but, if implemented on a coordinated basis across all three eastern states, might go for such a deal. Comments welcome.
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