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More tolls and charges can provide 'virtuous cycle' for infrastructure

18 November, 2013

More road tolls and direct user charges may be a feature of existing and future infrastructure developments according to industry leaders.

Speaking at the Committee for Economic Development of Australia's (CEDA) transport funding, financing and investment event in Sydney, Infrastructure Australia director of financing and funding policy Paul Roe said Australia needs to reform the way roads are funded and managed.

According to Roe, direct user charges can help solve problems with infrastructure financing.

"An important part of the solution needs to be around user charge arrangements in the transport sector," he said.

Roe said if direct user chargers are implemented and developed correctly they can provide a virtuous cycle for infrastructure funding.

"It helps provide a funding source for developing infrastructure…and it directly improves efficiency and national productivity," he said.

"It also enables governments to target those socially disadvantaged rather than providing general subsidies for users," he said.

KPMG AsPAC regional head of global infrastructure, Julian Vella agreed with Roe's views about direct user charges.

"Direct user charges are much more of a feature now and will be in the future, that is tolls," he said.

However Vella said implementing road tolls is a politically sensitive topic.

"I would agree that in terms of difficulty, it is probably one of the higher degrees of difficulty from a political perspective but I do think it is a very valid mechanism to use if it can again be used to fund investments and new infrastructure," he said.

"It is difficult but that doesn't mean we shouldn't be putting it on the table and talking about it."

On the subject of government debt, Vella said debt is not a bad thing and can be used to fund projects.

"Debt can actually be good if there is capacity to raise debt to invest in economically productive, sensibly selected prioritised projects," he said.

"It you have a proper and rigorous selection process, debt can be used to fund projects and there is capacity at the federal government level to do that."

Macquarie Capital Division Director, Andrew Newman also said there is more room for the Federal Government to support projects whether at a debt capacity level or by other means such as providing the right signals and direction for private proponents and state governments.

Newman also said infrastructure can boost Australia's productivity and return significant economic benefit.

Source: Committee for Economic Development of Australia

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tommo oz | Monday, November 18, 2013, 10:39 AM
Look who is saying the above. In this country public sector unions and their dross have played into the hands of all these private infrastructure peoples hands. Dross like the last labor government and all their badly managed, badly managed contracts have screwed over the state of NSW's cash flow. I reckon we need an inquiry into that period. I reckon the ICAC has hardly touched the surface on the crap from period. I have no hassles on toll roads if we the people own them and they go into the cash flow of the state of NSW. On the ones we have now look at how much we pay in tolls as compared to what they could have cost if the dross govt machine did its job and how much money we would have going into the state coffers. We the people need to instigate a revolt against the management in particular of the govt and semi-govt places. Go and hassle you local member, make the system work harder. Plus don't forget for a long , long , long time how Labor screwed over this state and the country for at least 1/2 generation. All these agenda's for private infrastructure around the world has put states and countries in debt, as they deprived them of cash flow. The roads in Germany have no tolls and they have 5000 km of autobahn and god knows how many thousand of kilometres of other high level roads. They have 3.5 times the population but we cannot even manage even one decent 120-130 km/hr road between Sydney and Melbourne, only 800 km long for a start. I drove from Dusseldorf across France and back this year. We are a joke as a country , because we allow it to happen
tommo oz | Monday, November 18, 2013, 10:54 AM
Actually Germany has 12845 km of autobahns. On a per capita basis we should have 370km of such road. that Brisbane all along the coast and half way to Perth It makes us look even worse Wake up before our govt machine sells us out even more. Don't expect labour the so called part of the people to help they have been the worst at this. The 70 billion Howard got from sales of public assets they just wasted all that effort. at least he retired debt, but I don't agree with those sales 100% Our public service is laughing at us and milking us all the way doing little, then we get screwed over twice with these private infrastructure deals. If we did not have the $500 billion waste from labor state and federal, we could have built it form the public purse. Who out there does not want another privately funded road. who wants all the tolls to go pack to the people. Who wants the public service to work properly and stop stealing from us
Peter | Monday, November 18, 2013, 11:20 AM
Put 100% of the revenue the government raises into Australia's roads and there will be no need for road tolls. The federal government is double dipping here and still crying broke. The states then hammer road users with "zero tolerance" speeding fines. If all revenue raised by governments from road users went back into the roads we would have world class, toll free roadways.
Michael | Monday, November 18, 2013, 12:30 PM
Section 92 of the Constitution of Australia states that: “On the imposition of uniform duties of customs, trade, commerce, and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free.... Toll roads where an alternate free route is not available is against the constitution in Australia.
Hedley | Monday, November 18, 2013, 12:55 PM
The public service group-think is to argue for the user-pays principle on infrastructure financing. Yet I have never seen their arguement where this principle leads us all towards a NET LOWER COST OF LIVING. The simple way, that I understand how infrastructure benefits us all, is to see the concept of publicly-owned infrustructure as a means of reducing the costs of living in our country. Once we own them of course. In this way we have a subsidy to our transport system, to our ship loading system, to our personal motoring travel costs, etc. and as a sum, we enjoy a lower cost economy. This should lead to a more cost-competitive economy. How then, can the public service (politicians included) argue to sell our freeways and our ports? How indeed can they argue that a net gain accrues to our economy by selling, then leasing back, any infrastructure. Unless they were selling stables solely used for a horse-driven economy, I just cannot see their logic. I guess that they don't have the exposure to the increasing costs of doing business in Ausralia. I am starting to join the dots. Any comments?
Goldie | Monday, November 18, 2013, 5:40 PM
Why is it that there is never enough money to do anything anymore. Governments at all levels have been crying poor for at least a decade or two demanding never ending budget cuts, selling off the nations/states/councils silverware and outsourcing more and more to private enterprise to try and balance the books. Before more private enterprise know it alls recommend yet more taxes on the motorist how about they identify what is already gouged in all it's forms and where it goes as there is no way it is all going back into roads. Let's not forget it was the likes of this lot who gave the Brisbane City Council NAND other authorities around Australia their 'expert assessment' that "X" number of vehicles will use the tunnels built in Brisbane and elsewhere and we all know they turned out to be financial disasters. Go to buggery with your plans for more toll roads and find what is already being raised from the motorist.
Hedley | Tuesday, November 19, 2013, 11:04 AM
The more that I read this nonesense about user charges, the clearer is my recollection of the words from my first business bank manager. This elder of the bank looked me in the eye and cautioned me about starting up my new business with too much debt. He said that his experience had shown some businesses actually selling their assets to "keep their business going" before hitting the wall and the bank then moving in. Too much debt killed their business. So, puting aside the comments from those quoted in the article, where they have financial interest with the projects, just where is the arguement that shows the net benefits of user-pays? Lost opportunity? That is, society will quickly repay the costs of an otherwise early investment because the savings are immediate and will quickly repay the debt. But the proposal is not about us buying infrastructure; the proposal is about covering the investor's business plan by US paying for it by way of tolls....Guess who then owns the infrastructure? Not us. Maybe I am missing something?
Roger G | Thursday, November 21, 2013, 9:54 AM
'User pays' always seems to translate as 'user pays twice' - tax revenues remain high, and we pay again for using the infrastucture our taxes have built. Toll roads are a particular concern: while I acknowledge that in this case it was funded privately the 'disastrous' Brisbane Airport Link costs well over a dollar for each minute saved, even in peak hour, and hardly surprising that it's under-subscribed. If the costs were reduced outside peak hours then the usage - and probably overall revenue - would go up. Having said that, my wife insists we use it, and it is certainly relaxing! But why so many drivers insist on driving through it side by side at 65 when the limit is 80 is a mystery - at that speed you can usually get to the other end just as fast on the public roads. But at 2.00 am we can usually go through at the limit, but at that time it generally only saves about 1 minute the traffic lights where we emerge see to that!) and to pay $4.50 to save one minute is hardly justified. (And don't give me the 'reduced motoring costs' argument - that may save another 20 cents!! If that.)
jonno | Friday, November 22, 2013, 9:04 AM
Toll roads are a farce. Large scale infrastructure (roads, rail, NBN, energy supplies and networks, airports, sea ports) that benefits whole communities should be paid for by our taxes, and the benefits of that infrastructure would flow through to the whole community, creating benefits such as increased business opportunities and efficiencies, resulting in jobs and therefore more revenue to pay for the investment in that infrastructure. What are the benefits of privatising monopolistic infrastructure? Sure, a privatised company may be more 'efficient', but it does that by minimising employment, training and maintenance. And if the infrastructure is sold to an overseas company, all the profits go offshore. These privatisation experts are totally braindead.