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Congestion Pricing & Infrastructure Australia (amended repost)

I have been glancing through the 3-part report by Infrastructure Australia (a summary here) on Australia’s infrastructure needs over coming decades. I was mainly interested in the transport sector and proposals that looked – on casual reading of the press – like yet another case for user charges (congestion charging and heavy vehicle charging for road damage costs). As I started working on these issues more than 20 years ago I do get a little peeved by the almost annual attempt to revive such discussions somewhere which always get promptly forgotten.

On this occasion I can only say I am underwhelmed by the low economics intelligenceĀ of the Infrastructure Australia analysis. They still don’t understand the basics of user-charging. Nor for that matter did my friend Ian Harper in his recent reported proposals for competition reform.

Infrastructure Australia take as given Australia’s dismal future population trend forecasts (fair enough not their concern, but in my view the forecast rates of population growth via our migration program are unacceptably high) and then look for ways of dealing with the surge in congestion and heavy vehicle demands that will result. Their answer? Build more roads everywhere and find ways of funding such investments. Their answer? Road use charges that fund the roads.

That fundamentally misrepresents the intent of user charges. Unless these prices target congestion and road damage costs this won’t ensure efficiency. Indeed the issue is not primarily one of funding at all. All roads – new and old alike – that are subject to external costs should be priced to eliminate the external costs imposed on them (congestion and road damagers) so that all roads are utilised efficiently. Then if the roads make a profit expand their scale thereby making expansion decisions that reflect demands at the socially correct price.

Its the same old dumb-assed “engineer think” that has dominated Australian road infrastructure planning for decades. It is a shame that they cannot get the basic logic right.
http://www.infrastructureaustralia.gov.au/news-media/media-releases/2015/2015_05_22.aspx

1 comment to Congestion Pricing & Infrastructure Australia (amended repost)

  • derrida derider

    Have to agree here Harry. As you say, it’s the engineers not the economists running the show.

    I think the idea of Infrastructure Australia (a more-or-less independent and expert body to set priorities in large infrastructure investment) was really good, but it has listened to the wrong experts too much. And it has let itself get too close to the pollies – remember the “infrastructure PM” and his naked determination to buy votes with roads?