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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