Planning to meet Australia's future road transport needs

24 May 2017, Sydney

• Good morning ladies and gentlemen. It's a pleasure to be here this morning at the National Electronic Tolling Forum 2017.
• I would like to thank ITS, and in particular Susan Harris for the very kind invitation to take part in this year's event.
• This morning I will be talking about planning to meet Australia's future road transport needs—in particular, how we chart a pathway to road market reform.
• Moving to a fairer, more sustainable system of road user charging was a key recommendation in Infrastructure Australia's 15-year Australian Infrastructure Plan, which we released in February last year.
• In fact, the Plan identifies overhauling the way we pay for roads as one of the biggest opportunities for infrastructure reform in Australia.
• As many of you would be well aware, the Federal Government has committed to appointing an eminent Australian to lead a study on the potential benefits and impacts of road market reform.
• This is a significant commitment from the Government—and perhaps even more importantly, it is a commitment that has bipartisan support in the Parliament.
• Today I want to briefly outline why shifting to a user-pays approach to paying for our roads is so critical, and provide Infrastructure Australia's perspective on the potential pathway to reform.
• I also want to discuss why we must make better use of existing infrastructure, including by investing in data collection and analytics, and talk about what this means for ITS and electronic tolling.
• But first, for those who are not familiar with Infrastructure Australia, I'll start by quickly explaining who we are and what we do.

Audit, Plan and Infrastructure Priority List

• Infrastructure Australia is the nation's independent infrastructure advisor. We're the ones behind the scenes looking at the evidence, doing the research and determining which projects are in our national interest.
• In 2015, we conducted the Australian Infrastructure Audit, which examined the drivers of future infrastructure demand in Australia, including population and economic growth.
• The Audit provided a top-down assessment of our infrastructure challenges and this is the primary evidence base for two key documents: the Australian Infrastructure Plan and the Infrastructure Priority List.
• The Australian Infrastructure Plan is our national reform agenda. It outlines 78 recommendations on the longer-term reforms and investments we need to ensure all Australians have access to world-class infrastructure.
• And it sits alongside the Infrastructure Priority List, which is the authoritative list of nationally-significant infrastructure investments Australia needs over the next 15 years.
• The Priority List was developed in close consultation with all levels of Australian government and is updated annually, so it represents a consensus view on the investments that will most benefit our growing cities and regions.
• We published a revised Priority List earlier this year, identifying Australia's 100 national infrastructure priorities.
• The List includes seven High Priority and 11 Priority Projects, each underpinned by a robust business case that has been approved by the independent Infrastructure Australia board.

Benefits of a user pays approach

• But identifying the infrastructure investments we need over the next 15 years and developing sound evidenced-based business cases to progress those projects is only part of the challenge.
• We also need to find equitable and sustainable ways to fund them.
• A central theme in the Australian Infrastructure Plan is that we need to diversify the sources of funding available for infrastructure investment.
• And that involves implementing user charging where possible to fund the development, maintenance and operation of infrastructure assets.
• This is because experience shows that where there is a direct link between usage and supply, infrastructure services are more efficient, responsive to consumer demands and financially-sustainable.
• Australia's road networks have comparatively weak links between usage and charging, with the notable exception of urban toll roads.
• Urban toll roads are typically well maintained and responsive to drivers' needs, whereas local roads are chronically underfunded, congested and less efficient at getting people from A to B.

A sustainable source of funding

• In these cases, the absence of user pays means the taxpayer remains directly involved in funding new road infrastructure across inception, planning, delivery and operations.
• As everyone in this room would well know, Australians currently pay to use the road network through a combination of fuel excise paid at the pump, vehicle registration charges and stamp duty.
• On average, motorists pay over $1,300 a year in road related taxes. And that's before the cost of fuel, vehicle maintenance, insurance and tolls are included.
• While funding for maintenance and development of our road networks is at the mercy of the annual budget cycles of governments, revenue collected from fuel excise is on the decline.
• Today fuel excise raises less than half of what Australian governments of all levels spend on roads.
• This fall in revenue will accelerate over coming decades as we shift towards more fuel efficient vehicles and alternate fuels, and the popularity of ride sharing services continues to grow.
• This means we will be collecting less from users while the costs to build and maintain the roads continue to grow.

Managing demand on our road networks

• Clearly, a funding shortfall is a growing problem for Australia's governments. But road reform must also address the broader challenges for our roads over coming decades, across road demand and supply.
• On the demand side, we must address the growing congestion in our cities, and improve road network efficiency to support a growing, productive economy.
• As we have shown in our Audit and Plan, our cities are becoming increasingly critical sources of growth in the broader Australian economy.
• Without action, we run the risk of allowing congestion to stifle some of this growth, constraining the productivity of our workforce, and reducing our global competitiveness.
• While great advances in ITS are allowing road operators to extract greater efficiency from our roads, demand management mechanisms can be far more effective if they are combined with fair and effective pricing of road use.
• By providing point-of-use pricing for road users, combined with network monitoring of not just roads but broader transport options, it will be possible to revolutionise how users plan and select their travel.
• By putting this information, combined with price signals, at users' fingertips, operators can greatly improve the efficiency of whole transport networks.
• On the supply side, we need to reform how we manage networks, allowing users to receive a good level of service more affordably. This will require smarter investment in our networks, across capital, operational and maintenance expenditure.
• Importantly, this will require changes across all levels of government, from how revenues are collected and dispersed among agencies, to how road budgets are allocated and contracts are managed.
• This is no small undertaking, but our view is that governments can unlock significant efficiency benefits through a series of no-regrets institutional reforms.

Need for a comprehensive road charging solution

• There are a range of potential solutions to our road challenges. There is clear merit in exploring these in detail, it is also clear that some approaches will not meet all our needs.
• We often hear calls for a congestion charge in our major urban centres, similar to those introduced in other global cities like London and Singapore.
• While a congestion or cordon charge could help to address some of the worst traffic problems in our largest cities, it would not provide a fair or sustainable means of raising the revenue governments require to build, operate and maintain our road network into the future.
• IA's view is that we need a comprehensive road pricing solution, where all road users—across light and heavy vehicles—pay a fair price for their use of the roads.
• A whole-of-network solution could provide sustainable funding for our roads while effectively managing demand on congested roads in our cities.

Public inquiry into road market reform

• Of course, Australia is a vast country. A one-size-fits-all approach to our roads is unlikely to meet the needs of all users.
• Roads provide a lifeline in many parts of the country. Without roads, many Australians would lack access to jobs, services or community facilities. And in many cases, these services can be vast distances away.
• It is understandable that vulnerable users are fearful that changing how roads use is paid for will leave them worse-off.
• That's why one of the first considerations in the road reform pathway should be how changes in road user charging are likely to impact users in regional areas, on the fringes of our cities, lower income earners, and others who rely heavily on the roads.
• Policy makers have a clear responsibility to respect and address the concerns of all road users. Engaging early and often with vulnerable users will be essential to provide confidence to the community that road reform can and will deliver fair and equitable outcomes for all Australians.
• The Government's commitment to an independent study on the potential benefits and impacts of road market reform is an important first step, and an excellent opportunity to build consensus within government, industry and the community.
• Although most of us who work in infrastructure understand that a user-pays approach can deliver better services for users, there must also be deep public consultation to gain community support for a new approach to paying for our roads.
• We need to take the community with us, or reform will fall at the first hurdle. The inquiry needs to engage directly with communities and lead public debate, to raise awareness of how we pay for roads and why this is unsustainable and unfair.
• Importantly too, the inquiry must send a clear message on the need for reform, and engage closely with industry to test public support for various options that fall outside of existing government policy.
• Shifting to a user-pays approach to paying for our roads will be critical if we are to meet our future infrastructure needs, but we acknowledge that any inquiry and resultant reform process is likely to take several years at a minimum.
• Therefore, in the meantime, we also need to look seriously at how we can get more from our available budgets—which means finding ways of making better use of existing infrastructure is critical.

Better use of existing infrastructure

• We need to ensure that existing infrastructure is used more efficiently, with a focus on maintenance and the use of new technology, including sensors and data analytics, to secure service improvements.
• For example, on urban roads ITS is already being used to collect, store and analyse data on traffic counts, travel times, congestion, incidents and faults through sensors at intersections to enable better management of traffic flows.
• In the Plan, we propose greater investment in these types of technologies as part of a broader program of network optimisation. This simply refers to the opportunities for low cost/high value investments which address capacity constraints.
• Network optimisation essentially targets the key pinch points on urban road networks with comparatively high public transport and freight use.
• And of course a key part of this is using data and technology to improve network operations by, for example, optimising traffic flow through intersection treatments, traffic light sequencing, clearways and incident management.
• Embedding technology in existing infrastructure can provide operators with rich data on network performance and use, which in turn drives improvements in efficiency and reliability.
• But we also need to find a way to give structure to this collection of data so we can use it to drive better outcomes for users on our roads and other infrastructure assets.

Infrastructure Performance Measurement Framework

• This brings me to the development of an Infrastructure Performance Measurement Framework that would routinely measure the performance of Australia's infrastructure.
• This was another key recommendation in the Plan, and involves measuring infrastructure outcomes with a particular focus on the users' experience.
• For example, when a road maintenance or construction project is completed, an outcome measure would focus on the impact on the user, such as congestion levels or travel time.
• Well-designed outcome measures deliver important information about the performance of networks, and provide guidance on what investments or reforms might be necessary and how successful past projects have been.
• Currently Infrastructure Australia is providing input into the Federal Government's Data Collection and Dissemination Plan, an important initiative that has come out of our recommendation in the Australian Infrastructure Plan.
• The Bureau of Infrastructure, Transport and Regional Economics is leading the development of this project and we are very pleased to be participating in its Steering Group.
• My hope is that it will provide the systematic collection, standardisation and reporting of data that will allow us to better understand the performance of infrastructure networks and outcomes of specific projects.

Concluding remarks

• Planning to meet Australia's future road transport needs will require a multifaceted approach.
• Firstly, we must continue to work at improving infrastructure planning and development.
• Through the Infrastructure Priority List, Infrastructure Australia has successfully established a consistent, transparent framework for defining our national infrastructure priorities and determining which projects will best meet our needs.
• We are working hard to support the development of robust, evidence-based business case for major infrastructure investments, but the onus is also on governments and the private sector to support and engage with that process.
• Secondly, to meet our future growth challenges, we need to move to a fairer and more sustainable system of funding our road infrastructure.
• The public inquiry announced by the Federal Government represents significant progress, and will be critical in charting a pathway to reform and building consensus around the limitations in our current system.
• Once the community understands the limitations of the current approach, we can then begin to think about how a user pays system of road funding would work in practice.
• And finally, we need to improve asset management, network optimisation and continue to invest in data and analytics.
• This will help ensure that existing infrastructure assets are being used as efficiently as possible, and provide guidance on what investments or reforms might be necessary to meet future needs.
• On all three measures, the pathway to reform is likely to stretch over the next decade, but it must start now if we are to deliver improvements in network performance, address fairness issues and provide a sustainable source of funding for our road networks.
• Thank you.