Committee view and recommendations
The need for objective and transparent transport planning
The committee notes that transport and urban planning are primarily
state issues. However, the Commonwealth has an interest in these matters by
virtue of the importance of cities to the economic and social wellbeing of
Australians, the Commonwealth's role in funding some infrastructure, and its
responsibilities for the environment, health and general living standards
(through social security and taxation), supervision of corporations and
The committee also notes the need to separate decisions to build certain
kinds of infrastructure from decisions about how they are to be financed. In
particular, some opposition to toll roads is primarily opposition to the
building of motorways.
A wealth of material was provided to the inquiry demonstrating the
importance of transport to the efficient functioning of cities. While scrutiny
of individual projects is necessary, transport has to be analysed in terms of
networks. Only governments have an incentive to think in terms of the network.
Toll roads have been a useful response to budget constraints and
unwillingness to borrow in the past, and toll road projects such as CityLink
have contributed markedly to the efficiency and amenity of cities. However
there was a good deal of concern expressed about the benefits and costs of some
current proposals, and particularly about the lack of transparency in the
development of those proposals.
The moves by some governments, including Victoria's, to publish the
business cases for competing alternatives are welcome. Evidence presented to
the inquiry suggests that there could be further and earlier transparency
regarding the consideration and modelling of proposed projects.
As the committee understands the role and functioning of Infrastructure
Australia, it appears that there may be scope for more comparative
consideration of projects. The organisation conducts audits of Australia's
infrastructure needs, the latest one being 2015.
However, its priority list is in terms of specific projects, and in updating
the priority list Infrastructure Australia invites specific proposals.
That Infrastructure Australia take a system-wide, mode-neutral approach
in its consideration of any project and consider alternative ways of solving
the problem being addressed.
That the government reaffirm that Commonwealth funding (by way of grants
or loans) will not be applied to any project which is not high on
Infrastructure Australia's priority list.
The distinction between funding infrastructure and financing it
Many submissions noted the difference between funding of infrastructure—
which will always be by the community, from tolls or other user charges or from
taxes—and the method used to finance it. Several pointed out that even in PPPs
the government is still likely to bear the risk of the project not being
completed on time and on budget, and also the patronage risk, which is
considerable given the extensive literature on optimism bias and strategic
misrepresentation. Others submitted that governments can borrow more cheaply
than the private sector, so that it makes sense for government rather than the
private sector to finance and own infrastructure.
Several submissions suggested that, if governments do want to call on
private capital, there are various ways to do it, including simple borrowing or
specific infrastructure bonds. The committee notes a suggestion by Mr Tony
Harris that governments could allow the private sector to fund, maintain and
develop an infrastructure project, which it would lease to the government for a
payment which might reflect wear and tear. The government could then retain
control as to whether tolls or other user fees were levied.
Impact of tolls
Impact on individual drivers
Tolls can form a substantial item in a household budget. They have
equity effects, in that some people travel free on the roads they use while
others pay tolls. This is exacerbated by the fact that many of the roads that
are tolled are in effect the only feasible form of transport for people living
in outer suburbs to get to work. In general, these people are not in the
highest income brackets. So some tolls are highly regressive.
Unsustainable toll infringement
Arrangements for recovering unpaid tolls are clearly unsustainable.
Evidence was heard of total debts of $1 billion arising from state pursuit of
tolls plus penalties. These are debts to state governments for penalties in the
criminal justice system, arising from enforcement activities that are provided
for in toll concession contracts. In the last resort they can end in a
custodial sentence. In many cases the debts are disproportionate to the means
of the offender and the severity of the offence.
The arrangements vary from state to state, such that in New South Wales
most enforcement is in the civil system through debt collection agencies. In
Victoria and Queensland, unpaid tolls are within a matter of months caught up
in the criminal system—as can a limited number of cases in New South Wales.
It is likely that much of this debt will remain unpaid.
However, the accumulation of cases is such that it is adversely affecting the
work of the Magistrates' Court in Victoria, and presumably imposing
considerable cost on the taxpayer. Even worse, in the committee's view, is the
cost to households in terms of anxiety and stress of having those debts hanging
That the Commonwealth make it a condition of any further infrastructure
funding that states ensure that the systems for pursuing unpaid tolls and
related charges are consistent with the treatment of comparable offences, if
necessary by insisting on variation of the toll concession contracts.
Interaction of toll roads with other policy issues
The commercial nature of past toll road projects has created a case for
commercial confidentiality which, in the committee's view, makes it difficult
to ensure that the process is as transparent as possible and to maintain public
Toll road projects can interact with environmental and health policies,
as well as with the transport plans of city councils. Any costs in these areas
should be taken into account in a sophisticated benefit-cost analysis of a
The most egregious constraint on other policy areas is through the
inclusion of 'non-compete' clauses and undertakings to compensate for loss of
traffic through government actions.
The long time frames of toll concession contracts create the possibility
that they will inhibit long term policy development. For example, the current
interest in road user charging being pursued by the Council of Australian
Governments and also separately by the Commonwealth will have to take account
of sections of road which are separately, and generally not efficiently,
already charged for. The difficulty of reforming the arrangements for pursuing
unpaid tolls and associated charges is also a function of the concession
The Australian National Audit Office's submission draws attention to
serious irregularities in the making of Commonwealth payments to New South
Wales and Victoria for the WestConnex and East-West Link projects respectively.
It notes that the Department of Infrastructure and Regional Development gave
proper advice which was not followed.
That the Commonwealth reiterate the processes for making payments to the
states for infrastructure projects, especially the necessity for milestones to
have been met.
That the Commonwealth take account, in any funding decision, of the
degree to which an infrastructure project might constrain future government
action, either by the building of the project itself or by clauses in the
That the Commonwealth lift the amount of infrastructure grant funding to
an extent that takes pressure off the states to seek private financing of
Senator Chris Ketter
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