Good Move: Fixing Transport Congestion - Infrastructure Victoria

March 2020
Good Move
Fixing Transport
Congestion
About us
Infrastructure Victoria is an independent

advisory body with three functions:
\ preparing a 30-year infrastructure strategy

for Victoria, which is refreshed every three
to five years
\ providing written advice to government

on specific infrastructure matters
\ publishing original research on infrastructure-

related issues.
Infrastructure Victoria also supports the

development of sectoral infrastructure plans
by government departments and agencies.
The aim of Infrastructure Victoria is to take a

long-term, evidence-based view of infrastructure
planning and raise the level of community
debate about infrastructure provision.
Infrastructure Victoria does not directly

oversee or fund infrastructure projects.
Aboriginal acknowledgment
Infrastructure Victoria acknowledges the

traditional owners of country in Victoria
and pays respect to their elders past and
present, as well as elders of other Aboriginal
communities. We recognise that the state’s
infrastructure is built on land that has been
managed by Aboriginal people for millennia.
Contents
Executive summary 04 05. How transport network pricing

Transport network pricing by the numbers 06 can work in Melbourne 39
Options for Government 08 Modelling transport network pricing 41
Pricing delivers highly positive outcomes for Melbourne 47
01. Introduction 11 Impacts on fairness can be managed 56
Victoria’s transport system under pressure 12
We need a new approach 13 06. Parking pricing reform 65

Current pricing is inefficient 66
02. Three big problems that A new approach to pricing parking 67
are getting worse 15

Problem 1: Longer and more variable travel times 07. How we’ll get there 68
due to congestion and crowding 16
Reducing congestion is the objective 70
Problem 2: Traditional solutions are not enough 18
Transport network pricing reform is a necessary,
Problem 3: The current system provides few fair and effective way to achieve this objective 71
incentives and isn’t fair 20
Trials 72
Delivering benefits from transport network pricing 73

03. How people pay around the world 24
Delivering benefits through expanding
Key elements of reforms 25 and reforming public transport 74
Results of the reforms 26 Packaging with other reforms and investments 75
04. Transport network pricing 08. What happens next? 79

is the best solution 29
Options for Government 80
Five pricing principles 31
Further actions to reduce congestion
Pricing can manage congestion across ahead of full transport network pricing reform 82
the whole network – and other problems 32
Next steps 83
Pricing can provide choices and improve fairness 34
Appendix – Classifying households by income group 84
Pricing conditions can help
gain community acceptance 35
References 85
Executive
summary
Victoria’s transport network is struggling Transport network pricing means a shift To make the most of existing and
Good Move: Fixing Transport Congestion
to meet demand, with congested roads away from traditional thinking. We need new assets and services we need a
and crowded public transport. Our to replace fixed upfront charges (such as complementary pricing system with
population is projected to grow bigger registration) and uniform fares with flexible inbuilt flexibility around time and mode
and faster, so the pressures on our charging according to time of day, mode of travel. This is validated by community
transport system will only get worse. and location to drive behaviour change. sentiment, with one in four people saying
If we make this change, it can be accepted they could change the time or mode of
There needs to be a change to the way by the community and provide an effective travel. What we need to do is incentivise
Victorians use the transport system if reduction in congestion. them to make that change.
we want to reduce congestion and get
the most out of our big infrastructure The community’s views are amplified The third problem is that there is no
Infrastructure Victoria
projects. A change to transport pricing throughout industry with an increasing incentive for people to change their
will motivate and incentivise people to chorus of voices calling for change. behaviour. If they did change, the whole
make that change. This was one of the Community support, economic evidence network would benefit – congestion would
top recommendations in Victoria’s 30-year and the calls for reform from industry be reduced, all modes of transport would
Infrastructure Strategy in 2016 and has show that the time to start changing be fully utilised and demand would be
been a key focus of our research program the way we pay for transport is now. spread throughout the day not just during
over the past four years. the peaks. Currently, pricing doesn’t
There are three big problems with our consider the mode or the distance travelled,
Our research has now evolved considerably current transport pricing system – problems meaning many people pay more even
with the inputs of enhanced modelling, that can all be addressed if we change the though they don’t travel far or often.
international case studies and direct access way we pay and change the way we travel. It’s unfair and doesn’t get the most
to community opinion. This paper explores the problems, the out of the transport system.
solution, the community view and options
It is now clear that the community is for government on the pathway to change. This paper explores an illustrative approach
open to changing their travel behaviour. to changing Victorians’ travel behaviour
For the first time, Victorians have identified The first problem is congestion and through various pricing scenarios across
the conditions under which they would overcrowding on public transport mean roads, public transport and parking.
do so. These conditions are practical, fair, longer and more variable travel times, Our approach is not intended to provide
easy to implement and give unprecedented resulting in frustration and lost productivity. a definitive prescription of what pricing
opportunity to make a change. With transport network pricing, our work changes should be. We expect that further
shows average speeds in inner Melbourne refinements would be made to the pricing
Our work also shows that network- during the morning peak are around model before it is implemented.
wide change to the pricing of roads, one third faster.
public transport and parking is required What our approach clearly shows is
to motivate the community to change Secondly, we know that the accepted that under all the illustrative scenarios,
their behaviour to get the most out of solution of building new roads and most Victorians are better off in terms
our current transport system, as well as expanding transport services is necessary, of price and choice and driving conditions
04 investment in new infrastructure projects. but not enough to fix congestion. also improve.
Governments have invested heavily in our transport
system, providing more choices and more services.
We need to now complement that with network-wide
pricing reform.
In a scenario that includes concessions Some can be done right now – such Ultimately we need to make the most
Executive summary
and additional subsidies to make sure as reviewing and trialling variations in of what we have. Governments have
the system is fair, up to 85% of people public transport fares across all modes invested heavily in our transport system,
could pay less for transport. of transport. providing more choices and more services.
We need to now complement that with
For those who pay a little more because We also support the introduction network-wide transport pricing reform
they continue to drive long distances, of distance-based pricing for electric because it is necessary, effective and
their travel time will be faster and more vehicles, with the proviso that the fair and motivates a willing community
predictable. People can make their significant health and environmental to change the way they travel.
own decisions and balance what benefits of electric vehicles are considered
is most important to them – mode, as part of any reform.
time, distance or cost.
Parking is also a significant consideration.
We’ve taken an illustrative approach We believe there is merit in supporting
and looked at a number of different the proposed local trial of demand-based
options for change. Like the community, charging in the CBD. Trials of demand-
we think the best model will include based charging could also be conducted
discounts and concessions for the at some new and existing car parks at
vulnerable and disadvantaged. Even with railway stations and park-and-ride hubs.
these concessions and some additional
Government subsidies for public transport, Government could also increase
these costs are offset by a more efficient and extend the parking levy to include
and better utilised transport system. Windsor, South Yarra, Richmond and
Prahran. It could conduct a full-scale
The best approach will start from trial of cordon charging in inner Melbourne
congestion busting, not revenue raising. and other congestion hot spots.
This is what our work shows and Other options are explored further
international experience validates. in this paper.
Cities such as Stockholm, London, Milan We think that planning for change
and Singapore have all introduced transport should begin now in order to reap the
network pricing with sustainable results – benefits of changed behaviour and avoid
reduced congestion, improved average unnecessary costs. Planning for change
car speeds and decreasing emissions. also gives people greater certainty, so
they can make choices about where
We know long-term sustainable change they live and what are the most efficient
is not easy, so we’ve identified a number and cost-effective ways to travel around
of options for the Victorian Government our city.
to consider starting. 05
Transport network
pricing by the numbers
What happens if we
keep doing the same thing?
If we don’t
change, things 3.5 time & money

will get worse: million
extra trips Congestion and travel time variability on key
Congestion will increase, with an extra freight routes around Melbourne will make it
3.5 million trips being made every day more expensive for businesses to move
across the city’s roads and public transport goods to customers, suppliers and export
networks by 2030. gateways. By 2046, around one third of all
freight transport in Victoria is expected to
occur in congested conditions.
878k
extra trips 30 mins
each day
Train, tram and bus trips will grow The proportion of Melburnians living
by 76%, which means 878,000 within 30 minutes of their place of
extra public transport trips each day. work will continue to decline, as
Despite this, Melbourne will still be increasing congestion makes it harder
a car-dominated city. More than 70% to access jobs and services across the
of trips in 2030 will be by car. city and increases travel time variability.
$10.2 billion In time,

operating
costs and
pollution
The cost of congestion, including time, In some city areas, amenity and livability
operating costs and extra pollution, will will decline due to congestion on
escalate to $10.2 billion in 2030 – up from arterial roads or truck traffic through
Sources: $4.6 billion in 2015. On average, congestion local streets, making these areas
Infrastructure Victoria is expected to cost Melburnians an extra less attractive to live or invest in.
(2016, 2018) $1,700 per year by 2030.
06
What happens if we
make a change?
Under transport network pricing with discounts:
up to Majority of users will experience
What happens if we’re willing to change our behaviour?

85% lower
-$
of people $ costs
pay less
Up to 85% of Victorians better off While some travellers who travel long distance from Outer Melbourne
– most Victorians will be paying less might pay more, they are from the high-income bracket – the majority
than they do today for transport of middle- and low-income experience cheaper transport costs
Almost
40%+ 110,000
new bus boardings
Removing
168,000
trips a day
Up to 168,000 car trips taken off Over 40% of the original drivers stop Almost 110,000 people shift to buses
Victorian roads every day – reducing driving into the inner cordon – shifting – influenced by the fact that buses are now
pressure on the road network to public transport the cheapest form of public transport
up to 25% speed
increase 8%
A B
reduction
of time in peak
congestion
Around 8% reduction of time Victorians

Up to 25% speed increase – spend in congestion in our busiest
within the inner Melbourne cordon peak periods 07
Options for Infrastructure Victoria has identified a range of options for the Victorian Government
to consider ahead of network-wide transport pricing reform. These options allow
Government Government to test, validate and refine new ways to pay for transport to ensure it
is efficient and fair, addresses congestion, helps manage demand and gets the most
out of our transport system.
Public Transport Roads
01. 03. 05.

Commence randomised control trials Conduct a randomised control trial of Introduce distance-based road
of changes to public transport fares a large sample of motorists including user charge for electric vehicles
different types of road pricing options
\ Specify public transport fares that targeting congestion across Melbourne \ Distance based charge, in comparison
vary by time, location and mode. with fuel excise, should recognise health
\ Specify a set of road pricing options and environmental benefits from electric
\ Sample of treatment and control that operate differently across Melbourne. vehicles.
groups of travellers selected and
treatment group travel according \ Sample of treatment and control groups \ Registration and stamp duty costs
to new fares. of drivers selected with the treatment should be reduced or removed to
group driving based on the new prices. support efficient use and adoption
\ Sample includes variety of income of electric vehicles.
groups including low income and \ Sample includes variety of income
vulnerable Victorians. groups including low income and
vulnerable Victorians.
06.
02. Conduct a full-scale trial of cordon
charging in inner Melbourne and
Introduce variable pricing for 04.
other congestion hot spots
all public transport trips Apply demand managing tolls to
all new freeways, bridges and tunnels \ Trial would reflect learnings from trial
\ Fares draw on results of
and implementation on new major road
randomised control trials. \ Tolls applied to new freeways, bridges
infrastructure (options 3 and 4).
and tunnels that manage demand.
\ Public transport fares that vary
by time, location and mode applied \ Tolls set to achieve a congestion
to all public transport. target and periodically/regularly revised
07.
to achieve and maintain the target
\ Fares designed to encourage efficient Price the use of all roads in
congestion rate.
use of the network while meeting the Melbourne Metropolitan area
equity objectives.
\ Extension of road pricing with a main
aim to reduce congestion applied
across all roads.
08
Parking
08. 10.
Options for Government

Expand and increase the existing Trial dynamic pricing for a selection
car parking congestion levy of new and existing carparks at railway
stations and park and rides
\ Expansion of Category 2 levy area
to include Prahran, Richmond, South \ Dynamic pricing of parking spots,
Yarra and Windsor. as described in option 9 applied to
a sample of new and existing carparks
\ Revenue sharing arrangements with at railway stations and park and rides –
each local council covered by the levy. the sample should first include carparks
at stations that already have good
\ Regular review and revision of levy
public transport connections to them
dependent upon level of congestion.
(or additional station connections) like
buses and/or on-demand services.
09.
Trial dynamic pricing of selected 11.
areas of on-street and off-street
Apply dynamic pricing to all on-street
council parking
and council controlled parking with
\ Dynamic pricing features prices that prices set to target a certain number
vary by time and across the sample of places remaining vacant at all time.
locations aiming for a certain number
\ Dynamic pricing as described in
of spots in the sample areas to remain
option 9 applied to all council
vacant at all times.
controlled parking spots.
\ Time restrictions relaxed on parking
spots in the sample area.
\ Prices regularly reviewed and revised 12.

to achieve and maintain the targeted Apply dynamic pricing to all parking
vacancy rates. at all railway station and park and ride
carparks
\ Dynamic pricing as described in option

9 applied to parking at all railway stations
and park-and-ride facilities.
09
10
Good Move: Fixing Transport Congestion Infrastructure Victoria
01.
Introduction
Victoria’s transport system is struggling to meet demand and

with a growing population, this is expected to worsen in future.
\ Travel is taking Victorians longer. \ We need a new approach. Our research

Congestion on the roads and crowding shows that comprehensive reform to
of public transport means longer, less how we pay for roads, public transport
comfortable journeys with increasingly and parking is the single most effective
unpredictable travel times. This is way of reducing congestion and getting
expected to cost the state $10.2 the most out of our transport system.
billion by 2031.
\ As congestion increases in Australia’s
\ The traditional solution is to build new growing cities, there are many in
infrastructure and expand public transport industry joining us in a call for change.
services, but this alone is not enough to
ease congestion. To get the most out of \ We have outlined a range of options for
our assets, both existing and new, we government to implement over the short,
need a complementary pricing system medium and longer term to make sure we
and a change in people’s behaviour. get the most out of our transport system
and government investment in expanded
services and new build projects.
Across Victoria, transport services and infrastructure are
struggling to keep up with rising demand. As the state’s
population continues to grow, we need a new approach to
ease the pressure on our roads and public transport services.
We need to provide an efficient, well-managed transport
network that allows people and goods to move around easily.
Victoria’s transport
system under pressure
Travel is taking longer, with more variable

travel times1. On public transport, peak

travel is more crowded for longer, making These problems are well
travel less comfortable. This reduces the
productivity of the economy and amenity
known, but the tools and
for those near transport networks. investments used so far
Vulnerable Victorians who are less able are not enough to fix them.
to travel in crowded conditions, or people
who need reliable travel (for example, those
with caring commitments), have less access
to jobs and amenities.
Investment in transport infrastructure

has proven to not be enough to address
these problems.
While roads and public transport in inner

Melbourne are overused, other parts
of the network (such as regional and
outer-suburban buses) are underused.
In some places, key roads are used for free
or cheap parking instead of higher value
uses such as bus, tram and bicycle lanes,
or wider footpaths. These are all symptoms
of Victoria’s underperforming transport
network and some of them will only get
worse as Victoria’s population increases.
1 S
ection 2 of this report provides extensive
evidence for the claims below
12
We need a
new approach
Infrastructure Victoria has examined
Introduction
these problems in previous papers
and reports. We’ve identified actions
to tackle congestion in the short
What is transport network pricing?
term, including overhauling the bus
network, introducing off-peak fares
and expanding and increasing
Melbourne’s car parking levy. Transport network pricing is a system or drivers to reschedule their trips
where prices are set to influence how, away from peak periods where
Transport network pricing was one
when and where people use the possible.
of the top three recommendations in
transport system.
Victoria’s 30-year infrastructure strategy, Under transport network pricing,
published in December 2016. A change While user charges already exist on prices can be set to encourage people
to transport pricing will motivate and some parts of Victoria’s transport to travel at times, to places and by
incentivise people to change they way network (for example, fares are modes that provide the greatest
they use transport. charged to use the public transport benefits relative to the costs. Prices
system and tolls apply on some roads) can also be set to reflect externalities,
Our research consistently shows that
these give people and businesses such as the costs of air pollution and
comprehensive transport network pricing
few incentives to make more efficient road trauma.
is the most effective solution to reducing
choices about transport mode or the
congestion in Victoria. Changing the way Importantly, transport network
time or location of travel.
we pay for transport can reduce congestion pricing can also incorporate
and crowding, help us get the most out of Currently, there are almost no measures to ensure fairness.
our road and public transport networks, incentives for public transport users
and make sure transport investments
deliver the greatest benefits to Victorians.
International experience shows that

introducing transport network pricing is
challenging but possible. Decisions have This probably means reducing or removing We’ve made transport network pricing
to be made about what types of journeys existing charges as we introduce new ones. a core focus of our research. We want
will cost money, how much to charge We need to address privacy concerns and to design a system that’s suitable for
and how to set up and maintain a system choose the right technology. We also need Victoria, that’s effective, efficient, fair
that is both efficient and fair. We need to set up the right market and governance and sustainable, and that can attract
community support or at least public structures and a smooth way to transition community support.
acceptance for this system. from our existing system to network pricing.
13
Many voices are calling
for transport pricing reform
What does transport network
pricing offer Victoria?
As congestion increases in Australia’s rapidly growing major cities, more groups
are calling for congestion charges and greater use of transport network pricing.
Infrastructure Victoria’s research and analysis

Grattan Institute — 2019 Infrastructure Partnerships – and our review of transport pricing around
Australia (IPA) — 2019 the world – shows that a well-designed
Citing international evidence
transport network pricing scheme can:
that ‘congestion charging works’, IPA has called for distance-based
Terrill et al. (2019a) recommends road user charging for electric vehicles
\ Reduce congestion and crowding as
a cordon charge around the Sydney ahead of a potential decline in revenue
travellers who can make low value trips
and Melbourne CBDs, which could from the fuel excise (Infrastructure
are encouraged to shift to other modes

mean up to 40% fewer cars entering Partnerships Australia, 2019).
or times of travel to save money, freeing
the CBD in the morning peak periods
up the system during peak periods.
and improvements in car travel speeds Productivity Commission — 2017
across the citywide road network. \ Get the most benefits from the transport
Continuing to push for road pricing
This will be more efficient and effective infrastructure currently being built.
reform in its Five-Year Productivity
than continuing to rely on a massive
Review, the Commission restated its
infrastructure building program \ Postpone the need for expensive
call for broader road pricing along
that costs millions of dollars. and disruptive large-scale infrastructure
with the phasing out of current
projects as we make better use of
road-related fees and charges
City of Melbourne — 2019 the infrastructure we already have.
(Productivity Commission, 2017).
The City of Melbourne is calling for \ Make it more likely that our major transport
efficient, equitable transport pricing Infrastructure Australia — 2016 investments are the most efficient choices.
(City of Melbourne, 2019). Priority
Infrastructure Australia called for a
outcomes sought in the council’s \ If combined with governance reform,
public inquiry into road user charging
Transport Strategy 2030 include provide a funding source to improve
in its Australian Infrastructure Plan
advocating for a road user pricing the financial sustainability of the
(Infrastructure Australia, 2016).
system and supporting effective public existing network, reducing pressure
transport pricing to manage demand. on general revenue.
To summarise, transport network pricing

helps us make better use of our transport
network – which enables us to spend
our time and money on better things
than being in transit.
14
02.
Three big problems

that are getting worse
We see three major problems with Victoria’s transport system.
\ The first problem is congestion and \ The third problem is that there are
crowding, with Victorians experiencing no incentives in the current system
significant congestion on roads, trains for people to change their behaviour.
and trams. This means trips take longer, Our current pricing system is simple
are less comfortable and less reliable, enough, but it doesn’t encourage
which costs people and businesses people to make different choices about
time and money. the time, route, mode or quality of
their trip. This means that even as
\ The second problem is that the congestion worsens, people are not
accepted solution of building new motivated to change their behaviour.
infrastructure to ease congestion won’t
solve congestion unless we take other
steps. To make the most of existing
and new assets and services we
need a complementary pricing system
with inbuilt flexibility around time
and mode of travel.
Our road and public transport network has three major problems that are
likely to get worse as Victoria and Melbourne continue to grow rapidly.
Problem 1:
Longer and more variable travel times
due to congestion and crowding
As more and more people and goods Infrastructure Victoria’s 2018 report Overall, using large amounts of
move around the city, we’re seeing Five-Year Focus provided more details Melbourne’s street space for parking
more congested roads along with of the problems we can expect even by adds significantly to congestion while
more crowded trains and trams. This 2030. For example, in the outer areas only benefiting a relatively small number
congestion means travel takes longer, of Melbourne, the peak would effectively of people (City of Melbourne, 2019).
is uncomfortable and unreliable, and expand by about five hours a day.
costs businesses and the community As the city’s population grows, failing to
money. It also means that small shocks, We also demonstrated how road tackle congestion and crowding means
such as a freeway crash or cancelled congestion affected buses and trams. that – even with a number of planned major
train, quickly affect thousands of Across the city, bus services in 2016 road and rail projects – most Melburnians
travellers throughout Melbourne. were becoming less reliable and fewer can expect to spend more time sitting in
services were running on time. Average traffic, travelling on crowded trains and
Infrastructure Victoria’s 2016 report tram speeds, especially during peak trams, and waiting longer for buses.
The Road Ahead documented congestion periods, were declining.
in Melbourne then and in the thirty years
to come. Cars in 2016 were crawling Public transport was also projected to
through morning peak hour traffic at an get more crowded by 2046, with more
than 30% of public transport trips being
Compared to other
average speed of 38kph. With most major
arterial roads in metropolitan Melbourne undertaken in crowded conditions. countries, Australia’s
operating at close to or above optimal Poor public transport performance
can mean that more people choose
on-road car parking spaces
capacity, over 30% of all car trips included
travel through congestion. to travel by car, which, in turn, creates also take up a significant
even more congestion.
Congestion is likely worse by now, with
amount of road space
continued population growth. We have Because on-street parking in Melbourne is
projected that by 2046 conditions would generally cheaper than off-street parking,
deteriorate even further, with more than drivers cruising for cheaper parking spaces
50% of car trips in the morning peak also make congestion worse. Compared
including travel through congestion. to other countries, Australia’s on-road car
The city’s western suburbs would be parking spaces also take up a significant
as congested as inner Melbourne is amount of road space (Terrill et al, 2019a).
today, and the northern suburbs would
be even worse.
16
17
Three big problems that are getting worse Infrastructure Victoria
Problem 2:
Traditional solutions
are not enough
One option to support a growing This has been the experience in Melbourne,
population is building more transport where each new major road has eventually
infrastructure. This has been the solution become regularly congested during peak
traditionally taken by government and times. Road projects are mostly justified
supported by Victorians. on the congestion benefits lasting a certain
amount of time as well as providing other
The right additional and upgraded efficiency benefits. But in many instances
transport infrastructure is needed to in Victoria those efficiency benefits have
support the efficient transport of people not been fully realised because the new
and freight around Victoria. This is or upgraded roads have become too
especially the case given Victoria’s congested at peak times too quickly.
population is likely to grow substantially

over the next 30 years. When the population of Victoria, and
especially Melbourne, continues to grow
However, economic theory and evidence into the future we will not get the most
reported in Duranton and Turner (2011) out of new infrastructure unless it is
confirm that expanding roads and public combined with transport network pricing
transport (especially roads) only relieves and behaviour change.
congestion temporarily. This is because
providing more transport capacity attracts
extra demand (known as ‘induced
demand’). While the extra capacity Getting the most out
improves travel times at first, eventually
travel times increase as more people use
of new infrastructure
the new infrastructure and congestion requires effective transport
increases again.
network pricing
18
Three big problems that are getting worse
Building more roads
causes more traffic
Extensive research has found that expanding public transport (buses) does
traffic expands with road capacity. not have any effect on traffic volumes,
However, a question remains as to which consistent with traffic expanding in a
way the causality runs. Are roads built similar way to that following road
to match demand or does demand expand expansion. It isn’t possible to build
to meet supply? your way out of traffic congestion.
Duranton and Turner (2011) apply

sophisticated econometric methods to
data to generate causal estimates of the Research shows that for
effects of road construction on traffic.
They find that for urbanised areas within
urbanised areas within
the US, expanding the interstate highway the US, expanding the
system leads to proportional expansions
in road traffic.
interstate highway system
leads to proportional
The expansion results from new
traffic, not that diverted from local expansions in road traffic.
roads. The results for major urban
roads show a lower correlation.
These are just correlations though.
Duranton and Turner also estimate Duranton, Gilles and Matthew A. Turner (2011)
“The fundamental law of road congestion:
the causal impact of expanding public
Evidence from US Cities”, American Economic
transportation (buses). They find that Review, 101(6), 2616-2652
19
Problem 3:
The current system provides
few incentives and isn’t fair
Today’s transport prices provide very Regional public transport fares are more hypothecated to investment in roads, so it
limited incentives for Victorians to make complex. While there are distance-based, is essentially a road user charge – similar
efficient choices. They only offer a ‘one time-of-day fares for V/Line services, there to the GST on fuel but less transparent.
size fits all’ model. are no common principles for how these It is also becoming less universal as a
fares are set. This results in inconsistencies, de facto road user charge.
This isn’t the case when Victorians travel such as people in different places
in other ways. We’re used to making paying very different fares to travel The number of electric and hybrid vehicles
choices about travel – airfares, hotel the same distance.2 on the roads is increasing and expected
rooms, Airbnb, Uber – that involve to become a larger share of the fleet every
balancing quality, convenience and While there are concession fares for low year. There is no allowance, in the fuel
price. The outcome not only more closely income and vulnerable Victorians, this excise, for ability to pay, unlike charges
matches consumer demand, but also simplistic fare structure means people for energy and water utilities. The fuel
achieves a more efficient outcome. making short trips on less expensive modes excise is also becoming less fair as electric
are cross-subsidising other travellers – there vehicles and, to some extent, more fuel
The current system of transport pricing is limited application of the ‘beneficiary efficient vehicles are mainly purchased
tends to be cheap rather than fair. pays’ approach. by Victorians with high incomes.
Victorians are used to vulnerable people
and families receiving discounts on utilities The Victorian Government sets or regulates Car parking availability and prices are
like energy and water. Current prices on a number of payments for travel in private important to people’s travel decisions.
roads don’t offer this. Some road user vehicles. Most of these payments aren’t Currently, most local government-provided
charges are applied to all road users explicitly linked with using a service – on-street parking is free, although a
irrespective of their status and of when, they are effectively taxes (stamp duty) or significant proportion of parking spaces
how often or how far they drive. tax-like fees (registration and licence fees, have time restrictions (with fines for
compulsory TAC charges). While there breaching them). There is some priced
More specifically, user charges for are concession rates in some cases, parking in high demand areas. Parking
metropolitan public transport via myki again, there is limited application of spaces at public transport stations (trains
tickets are only for access, with no change the ‘beneficiary pays’ approach. And and park-and-rides on high capacity bus
in fare for distance travelled or mode used. sometimes the fairest thing to do is for routes) are free and in high demand.
Fares are flat rates for two hours or a day those who don’t benefit not to have to
across two zones with almost no variation pay for those who do. So, again, travellers have limited choices
by time of day. Travel wholly within Zone to trade off price for convenience, or even
2 is cheaper. There are also myki Passes The Commonwealth Government levies availability. Much parking is allocated on
which provide cheaper daily fares when a fuel excise at 41.8 cents for every litre the first come, first served basis. Making
bought for multiple consecutive days of fuel, charged as part of the price of a product that is in high demand cheap
(up to a year). petrol. This tax varies with road use, doesn’t guarantee that it will go, in a fair way,
albeit based on the vehicle’s fuel efficiency. to low income and vulnerable Victorians.
Revenue raised by the fuel excise is not
20
2 See Infrastructure Victoria (2018) for further examples of anomalies in Victoria’s current public transport fares
Travellers have limited choices
to trade off price for convenience,
or even availability.

What’s wrong with how
we pay for transport now?
There are several problems with the way we currently pay for transport:
\ Metropolitan public transport fares \ The wide availability of free and

provide very little opportunity to cheap parking, irrespective of the
trade price for mode quality/trip cost of providing it, is an incentive
time/route as fares are largely for people to drive, rather than
identical across mode/time/route, use public transport.
even though there are significant
differences in cost and demand. \ The fuel excise makes no
allowance for people’s ability
\ Some regional public transport to pay. This will become
charges are inconsistent for increasingly unfair as more
different types of travel and users. people start driving high price
electric or fuel efficient vehicles.
\ There are few incentives for
people to change their travel \ Road charges, like registration,
behaviour to reduce congestion. stamp duty and TAC, are fixed
Some charges are not clear rather than linked to how much
to people when they use the transport infrastructure people
infrastructure. actually use or how far they travel.
Arguably infrequent users pay
too much and frequent users
not enough.
21
‘Cheap’ doesn’t equal ‘fair’
Making things cheap for everyone doesn’t If the way we currently ration access
necessarily benefit vulnerable people if the favours low income/vulnerable Victorians,
transport system is crowded. then this can help to create a fair outcome.
Unless a product is supplied to meet For example, if congestion makes travel

the demand at zero price, access to times longer and lower income/vulnerable
that product will be rationed in some Victorians have a relatively lower value of
way. The question is whether the way time, they will make greater use of transport
the zero priced product is rationed is fairer than if we use prices to ration access.
than that resulting from being charged
for it. Charging means the beneficiary But whether this happens can vary
of the product pays and the result is, depending on time, location and transport
at least, economically efficient. mode. For example, if congestion makes
travel more physically demanding, this may
When it comes to transport, we can’t mean vulnerable Victorians travel less than
ensure equity through low or zero priced they would if there is pricing. Similarly, if
fares. First, unless supply is expanded parking is allocated on a first come, first
to meet the demand at low or zero prices served basis, train station parking may be
then access to the infrastructure will have more likely to be taken by workers without
to be rationed another way. Congestion dependent children than those with children
and crowding on our transport networks who don’t or can’t leave home as early.
suggests we are not close to meeting
peak demand. These examples suggest that keeping
prices low for all Victorians doesn’t
automatically result in a fair outcome:
first come, first served isn’t necessarily
fair when it comes to transport.
22
Public transport pricing reform
The last major reform to public transport Whatever the primary reason, responding
pricing in Melbourne occurred over solely with simpler public transport pricing
about a decade between the 1970s was unlikely to be the most efficient and
and 1980s. effective approach.
Before the late 1970s, Melbourne train fares Are there still good reasons to have a very
included peak and off-peak fares and were simple ticketing system? With electronic
set according to a detailed schedule based tickets replacing physical tickets, the
on distance. Tram fares also varied with incentive to save money on printing
distance. This shows that Melburnians have physical tickets has disappeared.

successfully used sophisticated public
transport pricing before. Electronic tickets also enable different prices
across modes (as well as by distance and
In under ten years this was all replaced with time) in a flexible way not possible with the
the much simpler Metro card system, which paper tickets of the early 1980s.
evolved into today’s zonal system. The new
system had the advantage of covering The next version of myki can escape the
multi-modal travel but removed many constraints associated with paper tickets.
incentives to make better use of the system We need further research to see the effects
– incentives widely used around on demand, by mode and time of day, of
the world as shown on page 27. introducing a more sophisticated ticketing
system. ‘Mobility as a service’ apps, such
So why did these changes take place? as RACV’s Arevo product for Melbourne,
Annual reports for the Victorian Railways can make travel decisions much easier if
Board and Melbourne and Metropolitan the pricing system is more sophisticated.
Tramways Board (MMTB) suggest they were
in part a response to declining patronage Introducing road pricing along with more
and a way to support the introduction of sophisticated public transport prices will
ticket machines. encourage the most efficient use of all
modes of transport throughout the day.
But the decline in patronage doesn’t It could also facilitate travellers making
necessarily mean that the system had a more substantial and sustainable
become too complex or that Melburnians contribution to funding public transport.
had become unable to cope with the pricing
structure. It’s more likely the decline in
demand for public transport was linked with
the rise of cheap cars, the building of major Introducing road pricing,
highways and limited investment in public along with more sophisticated
transport in the rapidly growing suburbs.
The MMTB reports even include television public transport pricing, will
as a culprit! encourage the most efficient
use of modes of transport
throughout the day.
23
03.
How people pay

around the world
International case studies show that changes to transport pricing

have delivered sustained results in reducing congestion in cities
like Stockholm, London, Milan and Singapore.
\ These cities have enjoyed reduced \ These examples show that successful
congestion, improved average car reform of transport pricing requires
speeds and decreasing emissions. greater investment in public transport
services, giving people a genuine choice
in their mode of travel.
Transport pricing reforms have been successfully implemented in
major global cities like Stockholm, Milan, London and Singapore.
How other cities have proceeded with this reform gives some
guidance about how transport network pricing could be designed
and implemented in Victoria.3
We summarise these reforms in Table 1.
Key elements For road pricing and parking prices, all of the reforms that have been adopted at
scale are location-based (London, Melbourne, Milan, San Francisco, Singapore
of reforms and Stockholm).
In each of these places, congestion was

a major issue. But not all the proposed
location-based pricing reforms have Table 1: Selected transport pricing reforms around the world
How people pay around the world

been implemented. For example, cordon
schemes in Edinburgh and Manchester Scheme Main features
were rejected in referendums.
$
A second design feature of road pricing Road usage charges implemented

reforms is that either a cordon was
Singapore Electronic Major roads tolled to achieve congestion targets
placed around the congested areas or Road Pricing Tolls regularly revised to match outcomes to targets
– as in London – area charging was
London Congestion Area charge for central London
used.4 People were charged for entering Charge Applies weekdays during the day (a single charge)
the cordon during peak times but not
Stockholm Cordon charge for central Stockholm
during the off-peak. In London and Congestion Tax Applies during the day (different charges at different times)
Stockholm, there were some
Milan Area C Charge Cordon charge for central Milan
exemptions.5 On the I-95 Highway in
Single charge upon entry during the day
Florida, congestion pricing is applied to
OReGO (Oregon) Pilot of whole-of-network distance-based charging
some of the lanes, called ‘HOT’ lanes.
I-95 HOT Lanes (Florida) Some lanes of the I-95 highway feature dynamic pricing
A third feature, seen in London and set to manage congestion based on speeds and density
Stockholm, is that additional public
transport was provided to accompany
the introduction of pricing, even though Road usage charge proposals not (yet) implemented
in both of these cities the relevant Edinburgh Cordon scheme – not implemented after rejected in referendum
areas already enjoyed relatively good Manchester Cordon scheme – not implemented after rejected in referendum
public transport. Netherlands Nationwide pricing dropped after change of government
Only two non-location specific road New York City Cordon charge for lower Manhattan – still to be introduced
pricing schemes have been proposed Hong Kong Cordon scheme for Hong Kong island – still to be introduced
and neither fully implemented. In
Oregon, state-wide distance-based P
$
charging was introduced as a pilot but Parking charges

has not yet progressed substantially. Melbourne Congestion Levy Parking levy in central Melbourne
Nationwide road pricing in the SFpark (San Francisco) Demand-responsive pricing of on-street parking
Netherlands was proposed but dropped Perth station parking Priced parking at railway stations
before it could be implemented after a
change of government (D’Artagnan
Consulting, 2018).
3 All information provided in this section about the reviewed

reforms is from The Road Ahead (Infrastructure Victoria’s 2016
4 The difference between a cordon and area charge is that a
cordon charge is paid only when the cordon is crossed whereas
5 Examples include taxis and hire-cars (London), buses
and motorcycles (Stockholm)
25
discussion paper about road pricing) or France and Currie under an area charge a driver is charged if they drive within the
(2019) unless stated otherwise cordon, regardless of whether they cross it
Results of
the reforms
The evidence is clear – congestion Because there hasn’t been an at-scale to attempt to achieve parking occupancy
charging on roads reduces congestion. introduction of more comprehensive road targets, minimum and maximum price
charging, the only evidence on its effects caps were also set (SFMTA, 2014).
Introducing road user charges in London, comes from pilots conducted in Oregon
Milan and Stockholm has been effective. and Melbourne. In Oregon, distance The areas covered by the charges have
Despite large population growth in London, charges reduced the amount of driving, also tended to remain the same. Milan
congestion had not worsened ten years including during peak periods. The Oregon and Stockholm have not made any
after the reforms. In central Milan, the first pilot included some peak charging in significant changes to the areas covered
year of the new scheme’s operation saw Portland (the largest city in Oregon), by the cordon. London extended the
traffic decrease by 30% and average which also reduced driving in peak times. cordon area to the west, but this was
speeds increase by about 12%. In abandoned following the election of Boris
Stockholm, traffic inside the cordon Though it wasn’t an official trial, Johnston as mayor in 2008.
decreased by about 20% and this has Transurban’s Road Usage Study of
been sustained. As a result of implementing Melbourne, as described on page 28, Parking reforms in San Francisco and
the HOT lanes, the Florida Department of trialled a mixture of location-specific and Melbourne are probably the most
Transport has measured an increase of general charges on a sample of drivers in successful in terms of being expanded.
travel speeds by 200% on the free lanes Melbourne (Transurban, 2016). The report In 2018, San Francisco’s SFpark system
and up to 300% on the express lanes. on this study and further independent was expanded from a pilot of demand-
analysis by Martin and Thornton (2017) responsive pricing to operate at full scale,
Parking charges have also had an effect. revealed some promising results relating to while Melbourne significantly expanded the
In San Francisco, progress was made over the social acceptance of road pricing and area covered by its congestion levy in
time towards achieving occupancy targets the impacts of different types of road 2015. Singapore has refined its road
and reducing cruising for parking.6 The pricing, including on low income Victorians. pricing system and is planning to replace
supply of long-term parking places fell a gantry system with a GPS-based system
following the introduction of the Melbourne How have these different road user in the near future.
Congestion Levy by 2.7% despite growth charging schemes changed over time?
in employment and office space in the CBD In most cases, there haven’t been many A recent example of parking pricing
(Victorian Department of Treasury, 2010). changes. Stockholm and London have reform comes from Perth. In 2014, Perth
Analysis by Infrastructure Victoria (2018) made only a few changes to the charges introduced a weekday flat fee of $2 to
of outcomes after levy increases and an with prices set for considerable periods. park at train stations. People who park
expansion of the levy zone showed more Two notable exceptions are Singapore at the station can pay using a ‘SmartParker’
reductions in long-term parking spaces, and San Francisco. Charges in these card and must validate their card on the
which meant about 3,900 fewer vehicles cities are reviewed regularly and adjusted bus or train from the station on the same
in the morning peak. We would need two to meet average speed/occupancy targets day to avoid a penalty. This helps stop
freeway lanes to accommodate 3,900 extra (Pierce and Shoup, 2013). In San non-commuters parking at the train station
vehicles at a likely cost of over $1 billion. Francisco, while prices could be varied (before the charge, many station carparks
were full by 7:30 am on weekdays).
26
6 This has been shown in a set of studies such as Pierce and Shoup (2013), Millard-Ball et al. (2014) and SFMTA (2014)
How people pay around the world
Public transport pricing around the world
Many examples of public transport However, when travelling on Limited to be used to access the docked
pricing around the world are more Express services (stopping at only bike share system.
sophisticated than what we have in major stations) and Shinkansen
At its current size and density,
Melbourne, yet remain logical and (bullet train) services, higher fees
simple to use. Although each public are charged for the premium service Melbourne remains unique with
transport fare structure is unique to and the reduced journey time.2 its largely fixed fares. As explored
the city it operates in, it’s good in this paper, this is not always
practice to consider elements of The London Underground follows for the benefit of all Victorians.
public transport fare structures from a similar principle to charging based
both interstate and around the world. on distance, charging by the number
of zones travelled. Travel on the 1 transportnsw.info/tickets-opal/fares-payments/
Take Sydney, for example. The Opal Underground between certain adult-fares
card (Sydney’s equivalent to myki) zones is also cheaper during off- www.ipart.nsw.gov.au/Home/Industries/Transport
charges fares based on distance, peak periods.3 2 w

ww.tokyometro.jp/en/ticket/regular/index.html
www.jreast.co.jp/e/ticket/types.html
time and mode. The greater the
distance travelled, the higher the fare. For an international fare structure 3 content.tfl.gov.uk/adult-2020-prices.pdf
Metro/train and ferries are more similar to Melbourne’s, we can look 4 www.metro.net/riding/fares/
expensive while buses and light rail to Los Angeles. Typical fares are sold
are slightly cheaper. Travel on metro/ as either a one-way two-hour
train services outside of peak times is unlimited transfer pass or day passes
also rewarded with a 30% discount. (1,7 or 30 days) to use across all
The independent regulator, IPART, Metro rail and bus services – similar
sets maximum fare increases across to myki Money and myki Pass.
metropolitan and regional transport.1 Premium services like express
bus lines do cost more.4
Like Sydney, Tokyo metro fares
depend on the distance travelled. The Los Angeles model has also
Most local trains charge a basic recently integrated bike share into
fare, as do some express services. the system, allowing the Metro card
27
Trials across Melbourne – the Melbourne Road Usage Study (MRUS)
In 2016 Transurban released a After experiencing one of the They also found off-peak trips
study of usage-based road charging, alternative options for paying, that are non-work commutes were
capturing the responses of 1,635 60% said they preferred shifting some of the most price sensitive trips.
private light vehicle motorists from to a user-pays system. The issue These represented over 80%
across Greater Melbourne of privacy and information security of the total reduction in trips.
(Transurban, 2016). was also largely overcome, with
participants’ openness to trialling From an equity perspective, these
The study looked at five different new technology resulting in 84% results demonstrated that on average
user-pays charging systems. These becoming comfortable with the 65% of low income households would
ranged from charging per trip, GPS technology used. be better off under road user charges
charging per kilometre and a flat based on distance. 66% would be
fee. Systems focused on congestion An independent analysis of the better off under time-of-day distance
included a cordon charge and a time MRUS data at the University of charges and 69% would
of day charge – some of the most Melbourne by Martin and Thornton be better off with cordon charges.
commonly used charges around uncovered more detailed effects Martin and Thornton argue that
the world. These different systems of the variety of road user-pays despite opposition around fairness
weren’t just trialled on Transurban’s charging systems used in the trial and equity, congestion-based charges
toll roads, but across the whole (Martin and Thornton, 2017). could be a fairer and more efficient
Victorian road network. way to pay for road use.
They found that kilometre-based
One of the biggest outcomes charges can reduce driving, but
of the study was the preference don’t adequately target congestion.
of participants before and after Alternatively, congestion-focused
experiencing road-user charges. systems such as cordon charges
Before the study, 85% of participants paired with distance-based charges
were comfortable with the current lead to a bigger change in the
road funding system in Australia. number of trips taken.
28
04.
Transport network
pricing is the best
solution
Our research shows that the design and implementation of transport

network pricing across roads, public transport and parking is the
most effective way to ease congestion. A new pricing model should
be underpinned by five key principles.
\ These principles lead to a pricing \ The community is also open to

system that effectively manages change, under the right conditions.
congestion and doesn’t create Our community consultation and
additional demand. work with former decision makers has
helped identify specific conditions
\ Transport network pricing also to help build community acceptance
improves fairness for vulnerable people for changing how we pay for transport.
by providing incentives to choose
off-peak services or cheaper modes
and extends discounts.
To get the most out of Victoria’s transport network, we need
to consider new ideas. This means changing the way we pay
for travel in Melbourne and changing the way we travel.
Although the international examples show acceptance for these reforms, we

transport pricing reform can gain public have drawn on our consultations with
acceptance, be implemented and effectively a community panel and the reflections
reduce congestion, each is limited or of former decision makers.
context-specific in some way. It is worth
digging deeper and wider for guidance on Our aim is to propose a set of features
how to design and implement transport that would fit any transport pricing reforms
network pricing in Victoria. aimed at reducing congestion, providing
more travel choices and improving the
To support the analysis of how to design speed, comfort and reliability of travel
the reforms, Infrastructure Victoria has across the city, as well as features
reviewed the deep and extensive research that have the best chance of winning
base around transport pricing. To support community support.
our analysis of how to gain public
30
Five pricing
principles
To be successful, transport Table 2: The five principles of transport network pricing
Transport network pricing is the best solution

pricing must be efficient and fair.
Infrastructure Victoria has developed

Principle 1 Principle 4
five pricing principles – distilled from
the Australian and international All modes, routes Different prices for
economics literature on pricing – and parking are priced different products
that would set a strong foundation in different markets
Prices should be the central tool for
for transport network pricing in
allocating trips (including for parking) Prices should reflect demand and cost
Victoria. These principles are stated
within the transport network. A trip that conditions, and permit different prices
and described in Table 2.
isn’t priced is effectively underpriced, to be charged in different locations
Adopting these principles would distorting the choice made by travellers where possible. Prices can differ by
to take that trip instead of a more efficient mode, peak versus off-peak and by
ensure that prices are set to create
an efficient outcome – where people one. This principle also implements the local demand and cost conditions.
travel at times, to places and by beneficiary pays equity principle.7
modes that provide the greatest
benefits relative to the costs – while
also meeting important objectives
Principle 2 Principle 5
around fairness that are essential
to gaining community support. All costs are priced Equity
Congestion, pollution and contribution This principle implements vertical
to road trauma are all included in the equity (where different groups of people
price. This principle ensures that prices are treated differently) and also permits
include the social marginal costs linked different prices to be charged in different
to externalities related to each mode locations where possible. Lower prices
and trip. are set for groups of people identified
as less able to pay and in places where
demand from low income users is higher.
Principle 3
Provide choices but 7 This principle states that those who use (or benefit
not too complex from) a service should pay the full cost of using that
service. Conversely, those who do not benefit should
not have to pay
There should be a range of products that
provide choices to consumers. It should
be possible to use the transport system
without it being too hard to choose.
31
Pricing can manage congestion
across the whole network –
and other problems
Most academic and policy analyses for estimates for Melbourne). Congestion to change their behaviour for the least cost.
of transport pricing look at public on and around public transport has been This is extremely difficult for government
transport, road use and parking in theoretically analysed (Turvey and Mohring, to do as this information is usually private.
isolation. We have analysed the pricing 1975) but not empirically.
of each mode of transport and parking If too few people, or the wrong people,
simultaneously for three reasons. Reducing congestion means reducing are targeted or subsidised the policy
the amount of travel that takes place – won’t be effective. If too many people
First, public transport and road use are particularly at certain times. Some are subsidised the program will take
substitutes for one another, and road use Melburnians need to change the mode, up resources that could be better used
and parking complement each other. So time or maybe even the destination of their to deal with other problems.
the price of each mode affects demand trips so as not to contribute to congestion.
One of the main advantages of using
for the others. Second, choices about each

set of transport products are linked with Less congestion as a result of congestion pricing as an incentive to guide travel
externalities, so an efficient outcome in charging does not induce demand back choices is that the government does not
each market requires getting the prices onto the roads (as happens when road or need to specifically target or subsidise
right in all of them. Third, because there are public transport capacity increases due to individual travellers or trips to change their
relationships across the different modes, new investment or technology advances). behaviour. Each person can choose
this means that relying on prices in only one This is because the congestion price is whether to continue to travel at congested
market is unlikely to be effective and may faced by all drivers, current and potential, times or not based on the costs (including
distort outcomes in other markets. and this price can be set to achieve a target the congestion price) and benefits of doing
road speed/level of congestion. In other so compared with changing the time or
Congestion is the key market failure words, the less congested roads don’t mode of their trip.
affecting the travel experiences of attract additional drivers as they have
Melburnians. The absence of a price already chosen not to drive at that price. Driving on the roads increases the probability
mechanism to ration access to road, of others on the road being involved in an
public transport and parking assets Using prices to manage congestion is accident (see Clarke and Prentice, 2009 for
means they are overused. This inefficient advocated not only by economists but a review of this literature). Road pricing can
congestion, whether on roads or public also by government and private sector take this – and other negative environmental
transport, means people are travelling bodies such as Infrastructure Australia, externalities, such as air pollution – into
when the costs, including the costs placed the Productivity Commission and the RACV, account, and help to reduce them.
on other travellers, exceed the benefits. and by the 2010 Henry Tax Review and
2015 Harper Competition Policy Review. Pricing to reduce congestion, crowding and
In practice, this means people take longer other negative externalities will be most
to get places, squeeze onto packed trains Using prices has an important advantage effective if trips that contribute the most to
and trams or choose not to travel at all. over subsidies or other methods used to these externalities are assigned higher prices.
Extensive economic analyses have been change behaviour. These other methods This is difficult to do with simple bulk tickets
done looking at congestion on roads (for often require government to find out who which, for a price, offer unlimited travel on
example, see Hau (1992) and BITRE (2015) is making inefficient trips and who is able all modes at all times. Such tickets are also
32 less equitable if credit-constrained low
Some Melburnians
can change the mode,
time or maybe even the
destination of their trips
so as not to contribute
to congestion.
income travellers cannot afford the upfront

fee. Such tickets, like the Commuter Club
ticket, may need to be reconsidered as
Cross-mode impacts
part of public transport pricing reform.
Similarly, any road pricing component

of transport network pricing reform
As well as considering the externalities that public transport prices (in the will be more effective if a broader set of
and other issues associated with absence of congestion pricing) increase vehicles are included, such as taxis and
each mode, it is important to consider during peak demand, they are lower ride-share vehicles. Optimal prices for
cross-mode impacts. Depending on the in peak compared with off-peak. road-based public transport would also
trip, different modes can complement In other words, the efficient pricing incorporate road usage charges reflecting
or be substitutes for each other. system results in lower bus prices all costs and benefits associated
for peak services compared with with them.
Basso and Silva’s (2014) analysis of off-peak services.
simulation models for London, England Introducing road pricing that reflects
and Santiago, Chile featuring buses The possible reason for this result is congestion and other externalities, to
for public transport illustrates what that peak travellers respond to higher complement public transport will be more
can happen. As well as choosing a prices by changing mode rather than efficient than attempting to reduce driving
congestion toll for roads, the transport changing travel time. Peak public by increasing cheap public transport.
planner in these models must choose transport prices are low in order to Reducing driving by only increasing public
– for the sole form of public transport reduce costly road congestion. Prices transport will distort the public transport
(assumed to be buses) – fares, are high off-peak because if travellers market (and possibly other markets), even
capacity, frequency, number of stops substitute roads for buses it doesn’t if even if an efficient outcome is achieved
and their capacity, and the share of the matter, as there is no significant in terms of driving. This is because while
road that is bus-only. Travellers can congestion. it’s likely that reducing driving will increase
choose which mode and route to use demand for public transport, it’s highly
and whether to travel during peak or This analysis shows two things.
likely that an efficient outcome will lead to
off-peak times. First, the coordination of road and
changes in other markets over time, such
public transport prices can yield better
as markets for labour and different goods
Introducing a congestion toll results, outcomes. Second, it is important
and services.
in these models, in lower bus fares to use evidence about how people
as increased demand for buses actually respond to prices rather In other words, people respond to road
enables lower prices to be charged. than assumptions about what pricing not only by increasing their use of
seems reasonable. public transport but also by changing the
Another striking finding from this
origin and destination of their trips and
analysis is that rather than finding
what they do in their trips. They don’t
only swap a trip by private motor vehicle
with an as close as possible trip by public 33
transport – particularly in the long run.
Pricing can provide choices
and improve fairness
While it may seem obvious, it’s important Different prices for trips that differ Quantity discounting (such as lower
to state that Melburnians could not drive by mode, distance and time provide costs per trip when a greater number
as much as they do if there wasn’t car travellers with opportunities to trade of trips are made) is probably the most
parking at both ends of the journey. off each of these elements for a price relevant example, although others could
Driving and parking are complementary: that suits them. emerge. For example, it may be optimal
you can’t do one without the other. to provide more comfortable bus travel
For example, a traveller may find that taking with guaranteed seating at a higher price
Parking is managed in Melbourne in an off-peak bus provides the cheapest on some routes. Looking ahead, it may
different ways. We have focused on the high fare, and change their plans accordingly. be possible to embrace mobility-as-a-
demand car parking provided by state and On some days, a traveller will prefer to service with a subscription model that
local governments, both on and off-street. pay a higher price to take a quicker and includes public transport, road transport
more timely trip. On other days, they will and parking.

For the most part, this parking has prefer to save some money.
time restrictions to ensure some level of Differentiated pricing may also improve
turnover. But setting the price for parking As well as setting different prices by equity in other ways. Different prices by
to achieve other outcomes, such as mode, distance and time, charging different mode, distance and times can mean those
reduced congestion, has generally not prices for different types of consumers who benefit from each component of the
been considered. may also lead to improvements. Setting system make a greater contribution to its
a lower price for lower income Victorians cost, consistent with the beneficiary pays
Shoup (2006) reports on six studies for while maintaining full prices for other principle of equity.8
five cities that estimate the share of traffic Victorians is not only fairer, it can improve
cruising for parking and finds the share economic outcomes. It means that more
varies from 8 to 74%. There is strong people can access transport than if one
evidence from San Francisco that dynamic
parking prices — prices set and charged
set of prices applies to everyone. Even without an official
to achieve a minimum vacancy level – can To prevent free-riding, a concession card indicator of travellers’
reduce congestion linked to cruising. The must be necessary for travellers buying
implications are particularly important for cheaper tickets. Alternatively, where
willingness to pay, transport
Melbourne given the city’s many tram and incomes are lower in a geographically service providers can design
bus routes that run along shared traffic separate market, such as in regional towns,
streets with high demand for parking. prices could also be set at a lower level.
products with different price-
quantity-quality combinations
Even without an official indicator of
travellers’ willingness to pay, transport to appeal to different types
service providers can design products with
of travellers.
different price-quantity-quality combinations
to appeal to different types of travellers.
34
8 See Australia’s Future Tax System (2008) for more details
Pricing conditions can
help gain community acceptance
While most economists agree on the sure this compensation is delivered in a Over a three-hour structured forum,

need for transport network pricing, way that does not distort the incentives participants highlighted implementation
economic reasoning alone has not provided by network pricing to use strategies, policy refinement tools, and
persuaded policy makers to adopt transport at particular times in particular public education and promotion techniques.
these reforms or communities to locations. For example, reducing tolls or Concepts discussed ranged from clear
welcome them. fares would weaken the incentives and messaging, staging the reform, and
worsen congestion. We will discuss specific allowing the community to familiarise
So we have looked closely at the conditions examples of compensation in sections themselves with proposed changes.
that need to be met before a government is 5 and 7.
likely to introduce transport network pricing, Participants also highlighted several
along with the conditions that will make But is compensation the only issue considerations around the degree of
it acceptable to the broader community. preventing widespread support of road leadership required and the sensitivity of
Unless these conditions are satisfied, it’s pricing and public transport fare reform? Victorians to how change is implemented.
unlikely that transport network pricing will To identify the potential barriers to gaining The BWA forum discussed perceptions
be introduced. public acceptance for transport network of ‘winners and losers’, and identified that
pricing, Infrastructure Victoria did two appropriate messaging may help people
Economic theory suggests that introducing things. First, we convened a panel of to accept or understand that any ‘loss’
road pricing needs to be accompanied community members to explore the may only be short term.
by some form of compensation for road conditions under which they would be
users (Hau, 1992). This is because for all willing to accept transport network pricing.
road users, the private benefits of travelling, Table 3 on page 37 shows the eight
even in congested conditions, exceed the conditions required for public acceptance
costs (including private congestion costs). based on the work of the community panel.
Although this surplus increases as a result We have looked closely at
of the introduction of efficient road pricing, Second, BehaviourWorks Australia (BWA)
current road users will be worse off: convened a forum of former politicians,
the conditions that need to
bureaucrats and political advisors to be met before a government
\ Those who are priced off the road discuss how to make the proposed reforms
are worse off as they are travelling more attractive to the community and
is likely to introduce transport
at a different time or by a different current decision makers. It also discussed network pricing, along with
mode that was ranked lower than alternative policies or modifications that
driving on congested roads. might make the proposed policies more
the conditions that will make
\ Those who remain on the roads
acceptable. Forum participants agreed it acceptable to the broader
to take part on the basis that their affiliation
are paying more to do so.
and identity would remain anonymous
community.
Returning the proceeds of road pricing to to accommodate and frank and meaningful
the original road users would compensate discussion. This panel will be referred to
them for the change. But we need to make as the BWA forum.
35
We discuss transport network pricing with distance or differ across locations This paper focuses on the community
implementation in Section 7. or modes (the availability of which may conditions around pricing and the transition
differ by location) this should be considered to transport network pricing. Infrastructure
Infrastructure Victoria has organised the when setting prices. The community Victoria is currently doing further work
community panel’s conditions into three condition doesn’t necessarily rule out around Transport Network Governance
groups: pricing, transition and governance distance-based charging. which will respond to and incorporate
(see Table 3 opposite). In some respects these conditions. For now we would like
these groups reflect the five economic If distance-based charging results in some to note that we also see a very important
principles we gave the panel. Both benefits or is compensated for in a way role for an independent regulator of
recommend that transport network pricing that means people in particular locations transport pricing. IPART in New South
provide choices but not be too complex. are no worse off, distance-based charging Wales provides an ongoing example of
Both also call for consideration of equity. would be consistent with this condition. some of the type of work that a Victorian
But there would be tension with the regulator of transport pricing could do.9
The community condition that is likely to economic principles if, under the previous, This will be analysed and discussed
create the most tension with the economic non-distance-based system there had more extensively in future work.
principles is the first one: locality must
been substantial cross-subsidisation of

not be a disadvantage. The economic travellers from particular regions and the
principles imply that if costs increase compensation or benefits don’t cover
the increase in charges. 9 https://www.ipart.nsw.gov.au/Home
Seeking community views on transport network pricing
Changing the way Victorians pay for Panelists were independently recruited At the final session the community
transport is a major reform that requires through a process that combined panel provided a report which identified
extensive planning and community input. random selection and stratification eight conditions under which they
To inform our research, we convened a to ensure we included a cross-section would accept a change to the way
community panel in 2019 to get input of the community. they paid for roads and public transport
on the things that need to be considered (see Table 3).
before any proposed change to the way Throughout the consultation, panelists
we pay for roads and public transport. met three times and attended two The panel’s conditions highlighted
webinars. They were provided with the importance of fairness, equity
The panel of 38 Victorians worked background information on current and transparency when considering
together over four weeks to consider transport system operations, funding such a complex reform.
the question: Under what conditions, and charges and heard from a range
if any, would the community accept of speakers on various aspects of To read the community panel report
a change in the way Victorians pay transport network pricing. visit infrastructurevictoria.com.au
for roads and public transport?
36
Table 3: Community conditions for transport network pricing
Condition Description
Pricing This set of conditions relates to transport network pricing itself.
Any change in transport prices should not There should be a safety net for
01.
disadvantage people systematically based concession holders, low-socio-economic
Locality must not be a disadvantage on where they live. There should also be a cohorts and regional/rural Victorians because
cap on charges for transport use. paying for transport should never be a barrier
02.
to accessing services. Any changes also need
Users should be able to understand the

Pricing must be simple,
to address the unfairness faced by those
transparent and provide options new pricing system, but it should also provide
Victorians who are affected most negatively
choice based on ability to pay, time of travel
03. by the current pricing system.
and the transport options available.
Equity and social inclusion
Transition This set of conditions relates to the transition to transport network pricing.
The community panel recommended a trial when it comes to any increase in prices.
04. introduction of the system. Specifically, a This could include improvements in the
Trial introduction real-world trial of any transport pricing changes quality, frequency or speed of trips. It may
should occur before full-scale implementation also include providing a choice of alternative
05. to find unforeseen barriers and challenges. transport options that did not exist before.
Network pricing needs to come
In addition, transport network pricing needs
with service improvements
to come with service improvements, particularly
Governance This set of conditions relates to the governance of transport network pricing.
Any change should be open and transparent. Revenue and expenditure should also be
06. The community must have appropriate chances transparent. Under transport network pricing,
Open and transparent change to voice concerns and provide input to shape the government must ensure revenue from the
reform. The openness and transparency of the transport system (from both private vehicles and
decision-making process is critical in making public transport) is clearly stated. The community
07.
sure the public has confidence in and general also needs to know where the revenue is being
Transparency of revenue ownership of the reform. spent to maintain trust and ensure government
and expenditure is accountable for all spending and investment.
This condition recognises that full clarity about
any government proposal is necessary to There should be an independent regulator for
08. minimise public scepticism of the changes pricing. The community panel saw great value
Independent regulator and that poor public understanding will lead in the creation of an expert independent body
for pricing to community resistance. to ensure government accountability, transparency
and adequate community consultation when
proposing a change to transport pricing.
37
38
05.
How transport
network pricing can
work in Melbourne
We tested our approach to understand and illustrate the potential

outcomes for Melbourne under a hypothetical transport pricing system.
\ We applied the five principles of good \ A cordon charge would significantly

pricing and included the conditions reduce congestion and improve travel
identified by the community in our work. speeds by discouraging people from
driving through inner Melbourne.
\ Our work shows significant benefits
from the introduction of a network-wide \ Different prices for public transport
pricing model. based on mode and time of day
would motivate Melburnians to
\ Up to 85% of Victorians could pay change their behaviour to cheaper
less under transport network pricing times or modes.
with discounts including a safety net
of concessions and discounts for
the vulnerable and disadvantaged.
Summary of benefits of long-term
reform of transport network pricing
Travelling around Melbourne would be Overall productivity will have increased by

considerably different to what we experience reducing the time lost in congestion and, we
now and particularly what it would be like believe, liveability also improved. Better peak
with projected population growth. management also means some major transport
infrastructure projects may have been delayed,
A much greater share of travel would take freeing up funds for use on ther projects that
place on public transport. It is likely that the make life better for Victorians.
frequency and quality of service, as well as
public transport infrastructure, will have been

expanded to enable this. Driving will also be
faster and times more certain.
Key findings
Our modelling of the direct effects of the price changes proposed in the illustrative
TNP and TNP with discounts scenarios of transport network pricing shows that:
01. 03. 05.

Putting a price on roads The largest impacts of an inner Adding equity measures
during peak periods leads Melbourne cordon fall on those reduces the costs on those
to substantial increases in from the surrounding areas, that travel long distances but
road speeds in the cordon not the outer areas. does somewhat reduce the
area during the morning peak. efficiency of the system.
04.
02. There is mixed evidence of
Differentiating transport large shifts in the use of public
modes by price leads transport by time due to pricing.
to substantial shifts to This may reflect large effects from
the cheapest modes. the inner Melbourne cordon price.
40
We have applied the pricing principles
and community conditions set out in
Section 4 to illustrate an approach to
transport network pricing for Melbourne
that could reduce congestion, provide
more choices and be fairer than the
current system.
Modelling transport
network pricing
To analyse the effects of illustrative different As there are no ‘real-world’ examples and fuel excise. In both TNP scenarios
How transport network pricing can work in Melbourne

types of transport pricing we have used of comprehensive transport network these existing charges are not applied.
the Melbourne Activity Based (transport) pricing, we have tested three illustrative
Model (MABM) – one that is used to scenarios to see how Victoria’s transport This enabled us to focus solely on a change
model the impacts of non-build solutions network would work in 2031, with and in the pricing structure between the Current
to transport problems.10 Using this without transport network pricing. System and TNP scenarios. The TNP with
people-focused model, we have looked These three scenarios are presented discounts scenario returns less revenue
at what Victorians might pay on a typical in Table 4 (see page 42). than the other scenarios – a decrease of
day, who would benefit, who would be approximately $1.4 billion, meaning total
worse off and how best to incorporate The first scenario is the current set of road annual revenue from transport reduces from
fairness within the system. All the analysis charges and public transport fares, referred $7.5 billion to approximately $6.1 billion.11
that follows is based on MABM modelling to as the Current System. None of the TNP scenarios change the
conducted by KPMG. structure of existing tolls on Melbourne’s
The second scenario is an illustrative roads, they will continue to operate and
Because we see transport network example of transport network pricing which be charged in addition to any TNP charges.
pricing as a long-term reform we implements the principles stated in Table 2. These prices are illustrative rather than
have reported results run on the This example is referred to as the Transport estimates of the actual optimal prices.
2031 version of Melbourne, taking Network Pricing system (TNP).
new transport projects and forecast In the TNP and TNP with discounts
The third scenario supplements the TNP illustrative scenarios, all road users in
population growth into account.
example with a set of measures to meet Melbourne are charged $0.155 per kilometre
Note that the 2031 version includes the concerns raised by the community according to the distance they travel.
as completed the following transport panel as reflected in Table 3. This illustrative
infrastructure projects: North-East Link; example is referred to as the TNP with The inner Melbourne cordon charge would
Eastern Section of the Outer Metropolitan discounts system. apply to all vehicles entering the cordon
Ring Road; West Gate Tunnel; Mordialloc area during the AM and PM peaks. We have
Running the MABM requires assuming each modelled a cordon charge of an additional
Bypass; Westall Road extension; Metro
price in the scenarios. We proposed a set $1.00 per kilometre travelled within the
Tunnel Project; Fishermans Bend Tram
of prices to achieve two goals. First, they cordon. The cordon area used for the
Link; and upgrades to the M80, Tullamarine,
needed to be as consistent as possible with TNP and TNP with discounts scenarios
Calder and Monash freeways as well
the economic principles and community is defined in Figure 2 (see page 46). It is
as various public transport and road
conditions presented in Section 4. important to note that this cordon is also
improvements in the growth areas.
illustrative. Either a narrower (as used in
Second, the total revenue raised under
The modelling accounts for capacity Terrill et al. 2019a) or a broader cordon
TNP should, as closely as possible, equal
constraints. Individuals faced with could be applied in practice depending on
the total revenue raised when applying
transport system capacity constraints implementation costs, congestion reduction
the current fares and charges in 2031.
adjust their mode or travel time. benefits and impacts on surrounding areas.
This means the fares and charges under
TNP will return the same revenue as earned The values we assumed for public transport
from myki, registration, TAC, car stamp duty prices are reported in Table 5. Concession
holders pay 50% of these prices.
41
10 For more detail on the MABM and how it works, search for ‘MABM’ on www.infrastructurevictoria.com and refer to the KPMG-Arup Model Calibration and Validation Report
11 Though it would be possible, of course, to set prices at a level that maintains the current level or even increases the revenue earned from travellers
Five pricing 02. All costs 04. Different prices
principles are priced for different products
in different markets
01. All modes, 03. Provide

05. Equity
routes and parking choices but
are priced not too complex
Table 4: The Current System and two examples of transport network pricing
Model 1: Current System Model 2: Transport network pricing (TNP) Model 3: TNP with discounts
Public transport Public transport Public transport and private

motor vehicle road transport
\ All modes have the same prices \ Each mode has a different price
Same as Model 2: TNP System
\ Price reflects distance travelled based \ No zones: price for all modes is the sum
plus three equity measures:
on which and how many zones are of a flagfall and a per kilometre distance
travelled through (two zones in and charge with peak pricing applied within \ Quantity discounting: discount applied
around Melbourne and 13 regional zones) the cordon to per-kilometre charge 50% once total
expenditure across all modes (both public
\ Concession prices available for all trips \ Concession prices available for all trips
and private transport) passes a threshold
\ Same price all day in Melbourne except \ Off-peak discounts available at all of $10
for early bird special on trains and Free locations on all modes
\ Cap on daily spending for concession
Tram Zone
\ Public transport parking charged holders of $5
\ Off-peak discount for V/Line travellers based on two zones
\ 20 free travel days a year per person
going across at least three zones
(for all Victorians)
\ Free train station and Doncaster Private motor vehicle road transport
\ based on two zones
Park-and-Ride parking \ All existing charges are removed and
replaced with new direct charges
Private motor vehicle road transport
\ Direct charges: distance-based charge
\ Direct charges: Registration, TAC, across all of Victoria
road user charge for freight
\ Surcharge on distance-based charge
\ Indirect charges: fuel excise, stamp or entering inner Melbourne during
duty, Melbourne Congestion Levy peak periods
\ Parking: Priced in some locations, \ Parking: at all stations and Doncaster

time limits or free elsewhere Park-and-Ride is priced
\ Tolls: Charges apply to motorists \ Tolls: Existing tolls do not change and
using CityLink and EastLink toll roads continue to apply in addition to TNP charges
NB: Peak times are defined as 7am - 9am and 3pm - 6pm. All other times are treated as off-peak.
Concessions are applied to all people under 18, over 65 and tertiary students between 18 and 25.
42
Table 5: Transport prices in the TNP and TNP with
discounts scenarios (before any discounts or concessions)
Mode/service Price

kilometre charges are higher during peak
Cars \ All day: $0.155 per kilometre than off-peak periods. There is no free
\ Additional AM & PM peak cordon charge: tram zone or early bird free travel.
$1.00 per kilometre (within the cordon)
This system provides much more choice
Trains \ Peak: $1.70 flagfall and $0.09 per kilometre
than the Current System.
\ Off-peak: $1.50 flagfall and $0.07 per kilometre Providing concession prices for public
transport reflects the fifth principle of equity.
Trams \ Peak: $0.90 flagfall and $0.06 per kilometre In practice, there is no reason why it could
\ Off-peak: $0.70 flagfall and $0.04 per kilometre also not be applied to road use charges.
The TNP with discounts example

Buses \ Peak: $0.50 flagfall and $0.06 per kilometre
incorporates changes that primarily
\ Off-peak: $0.30 flagfall and $0.04 per kilometre
respond to the community panel’s concerns
about location not being a disadvantage,
Train station and Doncaster \ Zone 1 stations: $3.00 flagfall
particularly for people with low incomes.
Park-and-Ride parking charges \ Zone 2 stations: $1.00 flagfall We make three ‘safety net’ refinements to
the TNP model: quantity discounts, a daily
spending cap for concession holders and
These scenarios are only illustrative as they applied to road use and peak period a certain number of free trips each year.
are not set to optimise transport network charges are also applied to public
performance. An optimal transport network transport fares. Parking associated Each of these refinements, by dampening
pricing system would require the body with public transport is also priced. the incentives provided in TNP, risk losing
responsible for setting prices to perform That said, we have not tried to set the efficiency gains achieved by TNP. We
detailed analysis, possibly based on trials, fares that will fully recover operating have chosen to illustrate how some of the
of the potential consequences of different and capital costs or systematically concerns might be addressed and to
prices by route and mode, e.g. to minimise account for environmental externalities. estimate the efficiency losses from doing
rat-running and make best use of each so. Similar to the price system itself they
mode of public transport and the roads. Differences in the flagfalls across modes are not necessarily optimal ways to achieve
reflect the fourth principle. Trains are the fair outcomes.
The TNP example partially implements most expensive, followed by trams and
the first and second pricing principles in then buses. The per kilometre charge is
that all modes, including roads, are priced also higher on trains compared with trams
with distance, time-of-day and mode- and buses. On all public transport modes
specific prices. Congestion pricing is and in all locations, the flagfall and per
43
We are also conscious that we currently Table 6: Summary of safety net 2016), then quantity discounts to all
have very little information on how low refinement measures of TNP may worsen equity outcomes. BITRE’s
income and vulnerable Victorians respond with discounts scenario examination of long commutes found that
to transport price changes and so include distance commuting tends to be positively
in Section 8 suggestions on how to Scenario name Relevant discounts correlated with income. In other words,
address this. this suggests that while there may be a
TNP with \ 50% discount once daily
concentration of disadvantaged Victorians
The first refinement re-introduces quantity discounts total spending passes $10
in a particular area, those travelling long
discounting with a 50% lower per-kilometre for non-concession holders
distances to and from the area may not
distance charge after daily total spending \ A daily cap on travel
be disadvantaged.
across all modes passes a certain spending of $5 for
threshold. We have modelled a threshold concession holders
The equity measure of 20 free travel

of $10 for non-concession holders and \ 20 free travel days a year days a year would be particularly beneficial
$5 for concession holders. Quantity per person, for all Victorians to regional users because their most
discounts can improve efficiency if prices expensive travel days are likely to be
are above marginal operating costs. If more expensive than Melburnians’.
prices are below marginal costs efficiency While these refinements will reduce
is reduced as the discount encourages These free travel days could be especially
the difference between the charges paid
trips for which the benefits are less than important in making sure regional Victorians
across different locations, whether they
the costs of providing the transport. don’t have to pay a premium to visit
improve equity depends on whether
Victoria’s most important cultural, sporting
distance travelled is correlated with
The other refinements introduce a small and health assets, many of which are
disadvantage.
number of free trips per year for all located within central Melbourne.
Victorians and a cap on daily spending If distance is correlated with disadvantage,
for concession holders, effectively making Regional Victorians would also benefit
the TNP with discounts scenario will
additional trips after the cap free. We have greatly from the $5 daily cap on travel
improve equity more than TNP. Daily
modelled 20 free travel days a year per spending for concession holders,
caps are targeted directly at concession
person and a daily spending cap of $5 particularly because the proportion of
holders; the other measures would apply
across all modes for concession holders.12 Victorians older than 60 is higher in
to all Victorians. As the number of free
A system with free trips is less efficient regional and rural areas than in Melbourne
trips is limited, this is unlikely to have a
because the prices for these trips are (41.1% versus 30.9%). Concession
substantial impact on demand.
below marginal cost. In effect, these holders – such as seniors accessing
changes reduce the efficiency of the If distance travelled is not correlated with central Melbourne’s hospitals or students
transport system. disadvantage, as suggested by analysis accessing Melbourne’s universities – could
undertaken by the Bureau of Infrastructure, travel hundreds of kilometres in a day and
Transport and Regional Economics (BITRE, only ever pay $5 in transport charges.
44
12 To implement 20 free trips a year, we assumed 6% of trips were free. This is due to the limitations of the MABM model. Note also that because the simulation is for a particular day,
it is as though the travellers with the highest costs all took their free trips on the same day – so these results will probably be an upper bound of the impact
Figure 1: Regions of Melbourne
Legend
Transport Network
Regional Train Line

Metro Train Line
Tram Line
Freeway / Highway
Region
Cordon
Inner Region
Middle Region
Outer Region

We modelled 11 regions within Greater The Outer area includes some of the In the MABM, it is assumed that everyone
Melbourne as illustrated in Figure 1. most rapidly growing suburbs of Melbourne takes the same trips under both systems.
The regions defined in our modelling and is also where much future population Travellers respond to the new prices by
originate from boundaries as provided growth will occur. It would be easier and changing mode or the time when they travel.
in the 2017-2050 metropolitan planning more efficient to get transport network
strategy, Plan Melbourne. We have further pricing in place before this growth happens The MABM also does not model land use
refined these regions to get greater so the population can take this into account changes in response to pricing changes.
resolution and clarity into how Greater when deciding where to live. As we will see, Hence the responses reported by the
Melbourne moves using the MABM. this would also minimise the number of MABM can be interpreted as minimum
people who have higher transport costs estimates as it does not allow for changes
To simplify the presentation for some resulting from transport network pricing (or in trips or broader economic changes
analyses we group them into three: Inner, minimise the budgetary cost of addressing from transport network pricing reform.
Middle and Outer, as illustrated by the location-based inequities).
different colours across the 11 regions.
45
Figure 2: Inner Melbourne cordon as modelled
ve
tt A
Ellio
Coe ge C
ll r
s Alexandra
Pde
e
Hoddle S
ink
yL
t
Cit
Punt Rd
Olympic
Blvd
d
R
Westgate F
ity
wy
C
Our analysis compares transport Using a standard car means that the
Cordon area network pricing with existing transport analysis probably overestimates the
costs set by the state government, plus stamp duty for low income earners
fuel excise. Under the current system, and underestimates it for high income
Legend this includes fuel excise, registration, earners – but stamp duty is a relatively
compulsory TAC charge, stamp duty small component of average daily
and public transport fares. transport costs.
Border roads* of cordon area.
Because registration, the TAC charge
and stamp duty vary with the type of
car, a standard type of car is assumed A cordon charge would
for all individuals simulated in the model.
1km North
Under TNP, this includes the road
significant improve travel
distance charge, the cordon charge, speeds by discouraging
*Travel on these roads does
public transport fares and parking
not incur congestion charge
charges at train stations and at the
people from driving through
46 Doncaster Park-and-Ride. inner Melbourne
Pricing delivers highly positive
outcomes for Melbourne
Our modelling shows there could be Figure 4 reveals where the improvement
substantial benefits from introducing in speed is coming from. During the
transport network pricing in Melbourne. peak periods there are reductions in the
vehicle kilometres travelled in the cordon.
Interestingly, during the inter-peak, but

not the off-peak, there is also a non-trivial
reduction in vehicle kilometres travelled.
This could reflect the fact that other trips
Improved travel experiences associated with work travel (like doing
through reduced congestion shopping during the day) are also being
switched to public transport. This is less
Introducing a cordon price in inner
the case for trips after work.
Melbourne (Figure 2) substantially
reduces congestion in the inner cordon
area and improves travel experiences
as show in Figures 3 and 4.
During the AM peak,
Figure 3 shows the average speed in the
inner cordon area under the Current System average speeds are 36%
and for TNP.
faster, more than halving the
Figure 4 shows the effect of the cordon difference between the AM
price by reporting the percentage change
in vehicle kilometres travelled (VKT) in the peak and off-peak speeds.
inner cordon area by time period under
TNP compared with the Current System
(for 2031).
As Figure 3 shows, during the AM peak,

average speed increases by 36% (7kph)
more than halving the difference between
the AM peak and off-peak speeds. There is
an about 10% reduction in time spent in
peak congestion. Speeds also improve in
the PM peak, although this is less striking
as there is less of a gap to begin with.
47
Cordon pricingspeeds
Cordon average reduces congestion
– TNP vs Current System Figure 3: Cordon average
speeds TNP vs Current System
33 Average speed within the inner

31
Melbourne cordon under the Current
System and TNP in 2031.
29
/ AM peak: 7am – 9am
27
/ Off-peak (day): 9am – 3pm
25 / PM peak: 3pm – 6pm
Average speed (kph)
23 / Off-peak (night): 6pm – 7am (next day)
21
19
TNP
17
15 Current System
AM peak Off-peak (day) PM peak Off-peak (night)

* Vehicle kilometres travelled under proposed TNP System
Cordon pricing reduces driving within the cordon Figure 4: % change within
cordon of VKT* (per day)
2%
0% Percentage change in vehicle

kilometres travelled per day within
% change in VKT from Current System
-2%
the inner Melbourne cordon under
-4%
TNP compared with Current System
-6% in 2031.
-8%
-10%
-12%
-14%
-16%
-18%
48 * Vehicle kilometres travelled under proposed TNP System

Effects of road pricing on the Melbourne has a substantial effect, of over 196,000 car trips and a reduction
use of roads and public transport decreasing private vehicle trips and of over 3.6 million VKT per day). This
increasing public transport use across means a 7% increase in the number of
Figures 5 and 6 show the effects of the network. public transport trips (representing over
transport network pricing on road and 180,000 new public transport trips).
public transport use in general i.e. not just There is about a 1.7% reduction in Active transport does not change to
within the cordon. These results indicate the number of car trips and a 2.5% any substantial degree.
that introducing road pricing across reduction in VKT (representing a reduction
TNP reduces private vehicle use Figure 5: Private vehicle

use (per day)
11.85 146
Private vehicle use across Greater
11.80 145
Melbourne (Current System, TNP,
TNP with discounts) in 2031
11.75 144
Private vehicle trips (millions)
11.70 143
11.65 142
11.60 141
VKT (millions)
11.55 140 Car: trips
11.50 139 Car: VKT
Current System TNP TNP with discounts
TNP increases public transport use Figure 6: Public and active

transport use
2.75 Public and active transport use

across Greater Melbourne (Current
2.70
System, TNP, TNP with discounts)
2.65 in 2031
2.60
2.55
Trips (millions)
2.50
2.45 Public transport
2.40 Active modes
Current System TNP TNP with discounts
49
More travel choices People shift from cars to public transport
The results show that Melburnians could

250,000
respond to transport network pricing
200,000
by changing mode and time of travel
if offered more choice when ‘shopping’ 150,000
for travel within Melbourne. 100,000
While people make these choices to 50,000

Person trips
benefit themselves, they also benefit 0

others by using the transport system more -50,000
efficiently. The Current System, while very
-100,000
simple, does not give people the option to
seek out cheaper fares by taking the bus -150,000
or tram instead of the train, or to get to the -200,000

inner city more quickly by private vehicle -250,000
(or commercial and freight vehicle) by TNP TNP with discounts
paying a premium via a cordon charge.
Figure 7: Change in person trips by mode
Effects of differentiated Change in trips by mode of the TNP and TNP with discounts
Public transport
pricing on mode choice scenario, when compared with the Current System in 2031 Car
Although road pricing increases

travel on all modes of public transport
(Figure 7), making buses cheaper leads
travellers to make greater use of buses
People make more use of cheaper modes
as reported in Figure 8, showing a
substantial increase in bus patronage
% increase of kilometres from Current System
of almost 130,000 new boardings. 16%
14%
Effects of peak pricing
12%
on time of travel
10%
Figures 9 and 10 show the changes 8%
in boardings and vehicle kilometres
6%
travelled for the four periods of the
day under the two new scenarios 4%
compared with the Current System.
2%
For buses (noting that most bus trips in 0%

Melbourne will not cross the CBD cordon), TNP TNP with discounts
Figure 9 shows boardings increase at a
faster rate for the off-peak (day) compared Figure 8: % increase in travel by public transport mode Train
with the AM and PM peaks. There is a
Tram
considerably smaller increase in off-peak Percentage change in public transport patronage by mode (TNP
50 bus trips. and TNP with discounts compared with Current System) in 2031 Bus
TNP can change when people travel and their choice of PT mode Figure 9: % change in public transport

boardings by mode and time
18% Percentage change in public transport

16%
patronage by mode (TNP and TNP with
discounts compared with Current System)
14%
in 2031
12%
10%
% increase in boardings
Bus – TNP
8%
Bus – TNP with discounts
6%
Train – TNP
4%
Train – TNP with discounts
2%
Tram – TNP
0%
AM peak Off-peak (day) PM peak Off-peak (night) Tram – TNP with discounts
TNP can change when and how far people travel Figure 10: % change in passenger
kilometres by mode and time
Percentage change in passenger

18%
kilometres travelled by mode and time
16%
(TNP and TNP with discounts compared
% increase of passenger kilometres
14% with Current System) in 2031

12%
10%
8% Bus – TNP
6% Bus – TNP with discounts

4% Train – TNP
2%
Train – TNP with discounts
0%
Tram – TNP
-2%
AM peak Off-peak (day) PM peak Off-peak (night) Tram – TNP with discounts
51
Although road pricing The increase in passenger kilometres is The direction of effects on boardings for
greater than boardings. This is consistent trams are the reverse of those for trains and
increases travel on all modes with the increase in boardings during peak buses. There is a greater than proportionate
of public transport, making being for longer trips. It is also consistent increase in boardings during the peak
with the peak cordon price affecting long periods than the off-peak. This is consistent
buses cheaper leads commuter trips to and from the city. with the cordon having a large effect on the
travellers to make greater demand for trams – most of which run
For trains, there is a larger increase in much closer to the CBD.
use of buses. boardings outside peak times. In contrast,
passenger kilometres show a greater This suggests that although it costs more to
proportionate increase during peak times. travel on trams during peak than off-peak,
any disincentive to travel during peak times
This is also consistent with the long trips is overwhelmed by commuters switching
to the CBD shifting from cars to trains, to trams to avoid the cordon price. The
with people making more efficient use greater increase in kilometres travelled
of the network. The proportional increase during the peak period suggests it is mainly
in kilometres travelled during the inter-peak longer trips that are being switched.
is smaller than the proportional increase
in boardings, suggesting that travellers The increase in tram use may also be
are switching to trains for short trips. partially due to adding parking charges
The effect is more muted for the TNP to train station car parks. While reduced
with discounts case, suggesting people congestion on the roads is likely to improve
are possibly shifting to cars when given tram reliability, there may be a need to
a discount compared with TNP. expand the tram fleet.
52
Our modelling shows the cordon price and other
transport price changes lead to a 40% to 50%
reduction in the number of people driving within
the cordon.
Number of people driving into inner cordon area by home location

Cordon price mainly affects inner Melbourne residents

Outer
Middle
Inner
0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000
Figure 11: Number of people driving into inner cordon area by home location
TNP with discounts
Trips into the inner Melbourne cordon area by home TNP
location (Current System, TNP, TNP with discounts) 2031 Current System
The proportional increase The effects on buses are positive as As the number and destination of trips
these changes involve better use of does not change, this is the origin
in kilometres travelled during an underutilised asset — one that is of the shift to public transport.
the inter-peak is smaller than relatively cheap to expand.
Before we explore this result in
the proportional increase Figure 11 confirms that TNP reduces more detail, note that Figure 11
the incentive to drive within inner shows that the number of people
in boardings, suggesting Melbourne. Our modelling shows the affected is much greater within inner
that travellers are switching cordon price and other transport price and middle Melbourne.
changes lead to a 40% to 50% reduction
to trains for short trips. in the number of people driving within
the cordon.
53
Even under the Current System, relatively In the surrounding middle regions, Figure 13 shows that under TNP, in
small numbers of people travel to the inner this falls to between 3% and 8%. almost all regions except for those next
city, even with all the population growth Around 3% of travellers starting to the inner Melbourne region, the share
that will occur there. from the outer west, north-west and of those driving to the cordon (and paying
northern regions drive within cordon. the cordon charge) falls to between 0
Figure 12 shows this in more detail. In all other regions the share is between and 2%. The numbers involved are
Under the Current System nearly 18% 1 to 2%. always below 17,000.
of travellers who start their journey in inner
Melbourne drive within the cordon.
Figure 12: Cordon driving entries by home location, Current System 2031
The inner city regions

have the highest proportion
of travellers driving into
Outer north-west the cordon
3.7%
Outer north 3.3% No. of people driving in cordon
Mid north
2556 to 16,700
Outer east
Outer west 8.1% 16,700 to 30,900
Mid east 1.9%
3.5% 8.7% 30,900 to 45,000
17.8%
5.2%
3.3%
45,000 to 60,000
60,000 to 73,500
Inner
Mid west Outer south
Inner south 1.6%
Mid south-east 1.2% % of total travellers driving

in cordon from each region
30km North
54
While reduced congestion on the roads is likely

to improve tram reliability, there may be a need
to expand the tram fleet.
Figure 13: Cordon driving entries by home location, TNP 2031
Almost half the original
travellers stop driving into
Outer north-west
the cordon
1.7%
Outer north 0.6% No. of people driving in cordon
Mid north
2556 to 16,700
Outer east
Outer west 4.6% 16,700 to 30,900
Mid east 1.0%
4.4%
1.7% 10.8% 30,900 to 45,000
2.8%
1.8%
45,000 to 60,000
Inner
60,000 to 73,500
Inner south 0.9%
Mid south-east 0.6% % of travellers driving in

cordon from each region
30km North
55
Impacts on fairness
can be managed
Who has to pay more after the shift to parking charges (at stations and park-and- Before presenting these results it is useful
more efficient transport network pricing rides), along with the distance and cordon to note three things. First, because most
is a central concern when thinking about charges under the new systems. Because travel is by car the changes in average daily
public acceptance. Related to this is we work with averages, charges linked with costs are determined by changes in the
the community panel’s concern that road use make up the largest component cost of driving. Secondly, because fixed
no one should be disadvantaged based and this largely varies with distance. Not charges have been replaced by distance
on location when transport network surprisingly, transport costs increase with charges, charges now increase with
pricing is implemented. distance from the CBD because the further distance travelled. Thirdly, distance travelled
out people live the further they drive. increases with income. So, from any
In the first section we have analysed, for neighbourhood, high income earners travel
the TNP scenario, who will end up paying One of the community panel’s main the furthest, on average, and have the
more. We then analysed the extent to concerns was that people should not be highest travel costs.
which the set of discounts proposed in disadvantaged because of their location.
Table 4 deal with any problems as captured We have focused on this concern and These results show two broad patterns.
by the TNP with discounts example. We interpreted this very conservatively in First, people living in inner Melbourne
also checked to make sure that addressing that average transport costs do not pay less under TNP than under the
inequity by location does not undo all the rise. Community panel members indicated Current System. This is because inner
gains in travel speeds or change the shift they were willing to pay more to travel Melburnians, irrespective of income,
to public transport. more as long as they got more for do not drive as far as other Melburnians.
what they paid.
Low income earners in the middle
Under the TNP scenario, the goal of Melbourne region also pay less under
not increasing average transport costs TNP. However, high and middle income
is not met. People living in the outer earners in inner and middle Melbourne
suburbs have increased transport costs. pay more and all residents in outer
Who bears the costs of
Melbourne pay more. This is because,
transport network pricing Figure 14 shows the growth rate in average on average, they travel further.
and where do they live? daily costs between the Current System
and TNP for the three regional groups In general, under TNP, with a distance-
We have compared transport costs across the four income groups. All based pricing system, transport costs
under the Current System and under households in the model are classified increase more for higher income earners.
the two examples of transport into three income groups: Low, Middle
network pricing. and High. In addition, average costs
are calculated for all concession holders.
The specific charges included are
We discuss how the classification was
all Victorian Government charges,
done in an appendix.
Commonwealth Government fuel
excise, public transport fares and
56
57
How transport network pricing can work in Melbourne Infrastructure Victoria
Without discounts, TNP increases travel costs outside of inner Melbourne Note this is for 2031, after a decade of
substantial population growth. If we carried

out this change now, a much smaller
number of people would be affected.
High
This suggests that it is important to make
these changes sooner rather than later.
Middle This will allow people to consider them
when they decide where they live and work.
Low
They will also be relevant to decisions in
these areas about services, their frequency,
and investments in transport infrastructure.

Concessions
only More generally, it is useful to reform ahead of
demand, just as it is sometimes argued that
it is cheaper and easier to build infrastructure
-40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60%
ahead of demand. This is even more the
case for pricing reforms. The consequences
Figure 14: % change in average daily transport Outer of getting pricing reforms wrong if demand
costs (TNP) doesn’t eventuate are likely to be less than
Inner
getting infrastructure wrong. It is a lot easier
Percentage change in average daily travel costs (TNP Middle
to correct a price than to deal with a piece
without discounts compared with Current System) in 2031
of infrastructure that is no longer needed.
The final dimension we consider for its

impact on fairness is whether TNP is more
unequal than the current pricing system.
Figure 15 provides more detail on the On average, all regions in inner Melbourne To analyse this, we calculated the ratio
different geographical impacts of TNP. have lower transport costs in a world with of the average daily cost of the people
Circles show the change in average daily TNP without discounts. Average daily receiving concessions to those in the
travel cost for each of the 11 regions. The transport costs increase in the south-eastern high income group for each of the
larger the circle, the more travellers are suburbs, but by less than 10%. The greatest 11 regions.
affected. The colour of the circle, on the increases in average travel costs are in select
spectrum from blue to red, shows how areas of Outer Melbourne. However, the Under the Current System, the ratio ranges
much average daily transport costs change number of people affected is relatively small from 0.36 to 0.46; under TNP, the ratio
from – 50% (blue) to + 51% (red). (95 and 140 thousand in the outer north- ranges from 0.22 to 0.37. This suggests
west and outer east respectively). that low income earners pay much less
relative to high income earners under TNP.
58
Those who travel less
pay less under TNP.
Figure 15:

Change in average daily travel costs (TNP compared with Current System) in 2031
Without discounts, TNP

can result in some people
better off financially and
some people worse off
Outer north-west
Population Outer north
95,000 to 215,000 Mid north
Outer east
Outer west
215,001 to 340,000
Mid east
340,001 to 460,000
460,001 to 580,000
580,001 to 700,000 Inner

Inner south
Mid south-east
30km North
Change in the transport costs
-50% to-40% -40% to -30% -30% to -20% -20% to -10% -10% to -0%
10% to 20% 20% to 30% 20% to 30% 30% to 40% 40% to 50%
59
Supporting fairness Adding discounts means most Melburnians have lower transport costs
with a spatial safety net

The TNP with discounts scenario
supplements the TNP prices with High
measures meant to reduce the effect

of distance on transport costs.
Middle
The results from modelling the TNP with

discounts scenario are reviewed in this
Low
section. In Figure 16, we compare the
change in average daily transport costs

for income groups across the three Concessions
broad regions, as we did in Figure 14. only
Figure 16 shows that with TNP with

-50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60%
discounts the average daily transport cost
for low income earners is lower under
transport network pricing than under the Figure 16: % change in average daily transport Outer
Current System. Indeed, only middle and cost (TNP with discounts)
Inner
upper income earners in the outer areas
Percentage change in average daily travel costs (TNP Middle
will have higher average daily transport
with discounts compared with Current System) in 2031
costs. This is because some are choosing
to pay more to continue to drive, but in
less congested conditions. Concession
holders and low income earners across
Melbourne will have lower average daily
transport costs.
small number of people affected in the Under TNP with discounts,
outer north-east and north-west that still
Figure 17 further highlights that this set have higher average daily transport costs. the average daily transport
of discounts, in our illustrative example,
Note that on average, in other areas
cost for low income earners
largely manage any disadvantage linked
with location.
within the ‘outer’ group, like the outer is lower under transport
south and outer west (including
Cranbourne, Mornington, Werribee,
network pricing than under
While under TNP Melbourne residents
outside the inner suburbs had greater Sunbury and Mernda), average daily the Current System.
average daily transport costs, under transport costs fall.
TNP with discounts, it is only the relatively
60
Up to 85% of people could pay
less under TNP with discounts.
Figure 17: Change in average daily travel costs (TNP with discounts compared with Current System) in 2031

TNP with discounts ensures
most travellers are better off
financially, no matter where
they live
Outer north-west
Population
95,000 to 215,000 Outer north
Mid north
215,001 to 340,000
Outer east
Outer west
340,001 to 460,000
Mid east
460,001 to 580,000
580,001 to 700,000
Inner
Inner south
Mid south-east
30km North
Change in the transport costs
-50% to-40% -40% to -30% -30% to -20% -20% to -10% -10% to -0%
10% to 20% 20% to 30% 20% to 30% 30% to 40% 40% to 50%
61
Supporting fairness doesn’t We can see that outside of the AM peak The number of car trips still falls
there is almost no difference between by around 168,000.

eliminate the efficiency gains
average speeds in the cordon under TNP
and TNP with discounts. Under TNP with discounts there is
In this section we analyse whether
still a more than 40% reduction in
adding the discounts on distance
Figure 18 shows that in the AM peak, the number of people driving within
travelled eliminates the efficiency
the gain in speed from cordon pricing the cordon – particularly from inner
gains found with TNP.
is reduced by a quarter and there is and middle Melbourne (Figure 11).
In particular, we focus on the effects on still an 8% reduction in time spent in
peak congestion. Nevertheless, the This could mean that there are a lot more
travel within the inner Melbourne cordon.
bulk of the gain remains. drivers that start their journey from these
This is because one of the objectives of
regions. It is also likely that even with
TNP is to reduce congestion there.

Figure 19 explores the differences between quantity discounts, it is still better value
Figure 17 shows the change in average the TNP and TNP with discounts examples to use public transport for long trips
daily travel costs (TNP with discounts in more detail by looking at impacts by time from outer areas into inner Melbourne.
compared with Current System) in 2031. of day on vehicle kilometres travelled.
Figures 6 to 10 show we get similar, though
Figure 18 replicates Figure 3 while adding The pattern is similar to what we saw for a bit smaller, effects on public transport
average speeds in the cordon by time average speeds. There is a smaller decrease under the TNP with discounts scenario.
of day if TNP with discounts is applied. in vehicle kilometres compared to TNP. For example, we still get about 110,000
new bus boardings.
TNP still reduces congestion when discounts are applied Figure 18: Cordon average
speeds – all scenarios
33 Average vehicle speed within

31 inner Melbourne cordon
29
27
25
Average speed (kph)
23
21
Current System
19
TNP
17
15 TNP with discounts

62 AM peak Off-peak (day) PM peak Off-peak (night)
It is also likely that even with quantity discounts,
it is still better value to use public transport for
long trips from outer areas into inner Melbourne.
TNP still reduces driving when discounts are applied Figure 19: % change in VKT*
within cordon
5%
Percentage change in VKT within
inner Melbourne cordon, TNP and
0% TNP with discounts compared with
the Current System in 2031
% change from Current System
-5% * Vehicle kilometres travelled under

proposed TNP and TNP with discounts system
-10%
-15%
TNP
-20% TNP with discounts
63
64
06.
Parking
pricing reform
Driving and parking go hand in hand. Most parking across

greater Melbourne is currently free, with 96% of trips resulting
in free parking. This abundance of cheap parking encourages
people to drive.
\ The road space taken up by parked \ To get the most out of our transport
cars could be put to better use, system, we need a new approach,
by providing space for free-flowing where all parking must be priced, along
traffic, bus, tram or bicycle lanes with roads and public transport.
and wider footpaths.
Each example of transport network pricing we have modelled
(see Section 5) included pricing parking at train stations
and park-and-ride facilities. Our view is that parking must
be priced alongside roads and public transport to deliver
an effective, efficient and fair transport pricing system.
Current pricing
is inefficient
Currently, several factors combine The City of Melbourne (2019) has also prefer to pay less for a property without
to deliver inefficient outcomes in on- pointed out that while on-street parking is a parking rights.
and off-street parking in Melbourne. ‘premium product’ that provides a high level
of convenience by being located directly Currently, parking at train stations, bus
The first factor is that local government adjacent to the footpath, it is generally stops and park-and-ride locations are free.
policies have kept the price of parking cheaper to park on rather than off-street. These spaces are often occupied all day
low or free, imposing time restrictions One effect of the low price of on-street and are reported to regularly fill up early
instead. At present, 96% of trips in Greater parking means drivers cruise looking for on weekdays. In some areas, parking
Melbourne end in free parking (City of cheap on-street parking, contributing to spills over into nearby residential streets.
Melbourne, 2019). traffic congestion. Free parking is allocated on a first come,
first served basis, which may be inefficient
More than half (55%) of people who
The responsiveness of car parking to and unfair. For example, parents dropping
regularly drive during the weekday peak prices is shown by when Melbourne CBD their children at school often cannot use
have access to free, time-unlimited parking parking is in highest demand. It is not a train station car parks because they are
and just 17% of those who regularly drive weekday when thousands come to the rationed on a first come, first served basis
during the weekday peak pay for parking city to work and shop, but rather, Sunday rather than willingness to pay.
(Infrastructure Victoria, 2018). These figures (Taylor, 2018). There are two notable
show that the price of parking across the differences about Sundays: first, public Overall, the abundance of free and cheap
city – and especially in the inner city – does transport services are not as frequent parking in Melbourne gives many people
not reflect the cost of providing it. and second, all on-street parking is free an incentive to drive rather than use public
(although there are still time restrictions). transport. Previous community research
One reason local councils do not make by Infrastructure Victoria found that many
greater use of pricing parking could be that Another factor contributing to inefficiency is people who sometimes used a mode of
the revenue does not justify the collection that minimum parking planning provisions transport other than driving did so because
and enforcement costs. Where parking is for commercial and large-scale residential parking at the end of their trips was a
priced, there is only very limited variation in buildings artificially increase parking supply problem (Infrastructure Victoria, 2018).
pricing over time and location, instead of an in some locations.
efficient system that would vary prices
across locations and over time. Minimum parking provisions have been
criticised extensively (see, for example,
‘Free’ parking is actually expensive as it Shoup 2005) but continue to be used Free parking is allocated
uses a considerable amount of increasingly in Melbourne – particularly in suburban
valuable land. As noted by the City of Melbourne (Taylor and van Bemmel-
on a first come, first served
Melbourne (2019), free or low cost on-street Misrachi, 2017). A related issue is the basis, which may be
parking comes at a significant opportunity compulsory bundling of parking rights with
cost for the city, taking up space that could property. This reduces land use flexibility,
inefficient and unfair.
be used for higher value purposes that increases property prices and generally
would benefit many more people (City of overlooks the fact that some buyers may
66 Melbourne, 2019).
A new approach
to pricing parking
Our preferred model is that, as part Given Melbourne’s extensive network of
Parking pricing reform

of transport network pricing, all parking public transport services that share traffic
is priced and that prices vary over lanes with drivers cruising for parking, San Francisco’s demand-
time and across locations. This would dynamic parking pricing could improve the responsive parking pricing
apply to car parks attached to railway efficiency of these services and improve
stations and park-and-ride carparks. traffic flow. Roads such as Swan Street
This may sound impractical but time in Richmond, Chapel Street in South
varying demand-responsive pricing Yarra/Prahran/Windsor, Smith Street
In San Francisco, demand-responsive
is being implemented at scale in in Collingwood and Burke Road in parking prices are set to achieve an
San Francisco. Camberwell are good candidates for occupancy target to eliminate cruising
trialling the San Francisco approach. for parking.
There would also be no minimum or
maximum parking planning provisions. While we could only apply simple Generally, when more than 85% of
parking charges in our modelling, public on-street parking spaces are occupied,
One advantage of pricing all parking is that transport car parking is another good people will have difficulty finding a park,
it complements road pricing. Pricing literally candidate for dynamic parking pricing, indicating that the price is too low.
all road space creates a clear signal about allowing those who benefit most from Rather than charging the same hourly
the best use of the land – whether it is for this parking to access it. rate all day, the San Francisco system
free-flowing traffic, parking, bus and tram
(SFpark) adjusts prices per city block
lanes or footpath extensions. Developing Dynamic parking pricing could also
to achieve occupancy rates of between
clear price signals around road space be highly beneficial in popular precincts
60% to 80% during defined pricing
will become even more important if there where the demand for government-
periods. Prices are adjusted no more
are substantial technological changes provided parking fluctuates considerably
than once per month and announced
associated with transport, such as (such as Melbourne’s beach car parks in
ahead of time so drivers know them.
autonomous vehicles. Autonomous summer, the Lygon Street precinct on
vehicles or mobility-as-a-service changes Saturday nights or Richmond and East A pilot of the SFpark scheme showed
are going to require more road space Melbourne on-street parking during events). that prices actually went down more
to pick up and drop off passengers. Prices would be set to encourage a than they went up, reflecting the fact
minimum level of parking vacancy so that for the majority of the day parking
Another advantage is that parking linked that customers and visitors always have is underused. The pilot also showed
to public transport is priced, which would the option to visit these areas by car. increased sales for local businesses,
be more efficient and fairer than current
reduced cruising for parking spaces
arrangements, and also reflect the value of
and fewer parking fines issued
the land where these car parks are located.
(SFMTA, 2014).
SFpark is now being rolled out

across San Francisco on a
large scale.
67
07.
How we’ll
get there
We think there are three steps to building social acceptance

of transport network pricing.
\ Firstly, identify the objective as reducing \ Thirdly, deliver and demonstrate the
congestion. Overseas experience benefits of the reform. Expanded public
has demonstrated that focusing on transport and reforming existing charges
congestion-busting as the primary will help to demonstrate benefits to the
objective has been effective in building community of a change in how we pay.
social acceptance for change.
\ By making the case for transport network
\ Secondly, make the case for transport pricing as an effective and fair solution
network pricing as an effective solution for congestion, then delivering and
to reduce congestion, and assist the communicating the resulting benefits,
community to understand and accept that governments can build community
pricing reform is a necessary complement acceptance for a change to how
to building more infrastructure. we pay for transport.
There are now several examples of successful transport pricing
reform. We draw on these to suggest three steps to developing
social acceptance for introducing transport network pricing in
Victoria and to highlight policies that enable and complement it.
The first step is to specify the main Privacy issues and suggestions on how to of MaaS is complementary and doesn’t
How we’ll get there

objective of the reform. The second step is address these legitimate concerns have undo the efficiency benefits of transport
to provide the best solution to achieving been extensively analysed by the National network pricing reform. It is not possible
that objective. Because our proposed Transport Commission (2019) and Terrill to be more concrete until the nature
solution is about changing behaviour rather et al. (2019b). and extent of the diffusion of these
than accommodating it, the third step is to technologies becomes more definite.
credibly deliver the benefits from the reform. To improve and support the move to a
new transport network pricing system, Fourth, the focus on congestion means that
The measures discussed in this section there may be significant governance and the focus is also mainly on transport around
draw on the conditions identified by the regulatory issues that need resolving. greater Melbourne. There are important
community panel and the BehaviourWorks While these have been addressed during issues around public transport pricing in
Australia (BWA) forum (see Section 3), the implementation in other jurisdictions, regional Victoria – these will be subject to
along with the experiences of successful – Infrastructure Victoria is carrying out more extensive analysis in ongoing work
and unsuccessful – reforms overseas ongoing research on the Victoria-specific at Infrastructure Victoria.
(see Section 4). dimensions of this issue.
Finally, there may also be significant
There are several dimensions to the Third, if there is substantial diffusion technological requirements of a new
problem that we will not address – of mobility-as-a-service (MaaS) and system. Some of these are also addressed
not because they are not important, autonomous vehicles, there could be in Terrill et al. (2019a) but this is a rapidly
but because they have been thoroughly substantial though variable implications developing area best addressed in future
analysed elsewhere. First, one of our for the pricing of transport infrastructure. work. It is worth noting for now that the
principles is that all costs be priced. Autonomous vehicles are analysed technology exists to implement the systems
This includes any negative externalities extensively in Infrastructure Victoria’s report we have considered in this paper.
such as carbon emissions or the Automated and Zero Emissions Vehicles
contribution to road trauma. There Infrastructure Advice (2018).
is a well established methodology
for doing this (see for example Parry Transport network pricing reform ahead
and Small, 2005). of this development would leave us better
equipped to handle any potential negative
Second, there are important privacy outcomes e.g. due to traffic proliferation.
issues as transport network pricing requires Similarly public transport network pricing
greater information on when, where and reform could include measures that support
how individuals travel to provide benefits getting the most of MaaS by enabling
for behavior change. private and public sectors to more easily
interact, and could also ensure that pricing
69
Reducing congestion
is the objective
In Section 2 we outlined three key Data collected in congestion pricing and introducing the free tram zone, have
problems facing Melbourne’s transport will help us make more efficient decisions probably increased the financial support
network: congested roads and public about investment in transport. Singapore metropolitan public transport needs from
transport, ineffective solutions, and has used average speed targets to refine general revenue. And this revenue is
lack of choice and equity. its road pricing over time and space. San collected, in part, from people who do
Francisco has used vacancy rate targets not use the system.
The approach presented in this paper in setting parking prices. This led to average
addresses each of these problems. parking prices falling – outside of peak The funding argument would probably be
However, to improve the community’s times, prices could be lowered to make stronger if the revenue collected was solely
acceptance of transport pricing more efficient use of parking. returned to the transport system. But most
reform, it is important to focus public of the revenue collected from travellers
communications on a single clear and Finally, it is also worth noting that the need goes to general revenue rather than being
important objective. That objective should to fund the transport system has been used hypothecated to the transport system.
be reducing congestion. It is the main as an alternative argument to support
problem facing the transport network transport pricing reform. This was the Returning revenue to the transport system
now and it is only going to get worse. motivation for the pilot road pricing scheme requires significant governance reform,
in Oregon and the proposed congestion which is the focus of ongoing work at
Reducing congestion was the main pricing system for New York City. Infrastructure Victoria.
objective associated with the successful
introduction of road pricing in London, Once generally accepted, funding has
Milan, Singapore and Stockholm. been part of the motivations for further
Melbourne’s parking levy was also reforms to the Stockholm congestion
motivated as part of a way to address charge (Eliasson, 2014).
congestion in inner Melbourne. The BWA
forum also saw congestion as the sort Infrastructure Partnerships Australia
of problem a political party could seek has argued for applying a distance-
a mandate on, with a set of solutions based charge to electric vehicles to
included in an election campaign. complement the fuel excise for general
revenue paid by petrol and diesel driven
Making reducing congestion the objective vehicles (Infrastructure Partnerships
of reform supports making the transport Australia, 2019).
system more adaptable as supply and
demand change. If congestion reduces To date, there are no examples of transport
more than expected, prices can be pricing reforms motivated by financial
reduced. If congestion reduces less than constraints proceeding to full scale.
expected, prices and/or services and Indeed, for Victoria, most pricing reforms,
infrastructure need to be increased. such as eliminating the distance-based
elements on metropolitan public transport
70
Transport network pricing reform is a necessary,
effective and fair way to achieve this objective
We have already shown that transport with popular support, is the expansion of An interesting similarity across cities that

network pricing is a necessary, effective the road network (new freeways or adding have successfully reformed transport
and fair way to reduce congestion. Our lanes to existing ones) or public transport. network pricing is that large expansions
modelling suggests an inner Melbourne This is encouraged by major projects often of the road network or, to a lesser extent,
cordon charge would substantially being described as ‘congestion-busting’. public transport would have been either
increase average travel speeds in inner physically impossible or prohibitively costly.
Melbourne. International experience As we argue in Section 3, economic There is very little space for new freeways
also shows introducing road pricing theory and empirical evidence suggests through central London or Milan. Melbourne
reduces congestion. adding capacity alone does not significantly faces the same challenges of valuable,
reduce congestion beyond the short run. limited space above ground.
However, it is not enough for transport Investment in transport infrastructure
network pricing reform to be one way to and services need to be complemented
reduce congestion. It has to be accepted by pricing reform for congestion to
as the best way. In Victoria, the alternative be reduced.
71
Trials
One approach that has been shown Oregon and San Francisco also began
to help convince people that transport with pilot schemes of distance-based road
network pricing is a necessary, effective user charging and demand-responsive
and fair solution to reducing congestion parking pricing (Pierce and Shoup, 2013).
is a full-scale trial. The Oregon trial was opt-in, while the San
Francisco pilot was conducted across a
There are several international examples small set of locations. San Francisco’s
of how this can work. Milan already had parking pricing program was eventually
experience with a pollution control scheme fully rolled out. Although Oregon’s road
that had similar effects to congestion pricing program has not proceeded to full
pricing. In Stockholm, a full-scale trial scale, other states such as California and
was very effective as part of gaining social Washington also conducted trials of
acceptance for transport network pricing distance-based charging.14
reform (Eliasson, 2014). Winslott-Hiselius
et al. (2009) show that before the trial, The Melbourne Road Usage Study
media coverage was largely negative, but provides a Melbourne-specific example
after the trial it was overwhelmingly positive. of how trials can help build social
acceptance of transport network pricing
The full-scale trial was followed by a reform. As described earlier, at the start
referendum, which voted for congestion of the study 85% of participants said
pricing. Referendums without preceding they were comfortable with the current
trials were held in Edinburgh and funding system. After experiencing
Manchester; these were not successful.13 alternative road-charging options,
This may have been because, without 60% said they preferred a user-pays
a full-scale trial, people could not see system (Transurban, 2016).
the benefits.
The community panel also highlighted

‘real-world’ trials as one of the conditions
under which they would support transport 13 See https://www.theguardian.com/politics/2008/dec/12/
congestioncharging-transport22
network pricing reform. The City of
14 See https://www.sfmta.com/blog/san-francisco-adopts-
Melbourne has also called for a trial of
demand-responsive-pricing-program-make-parking-easier ,
road pricing, noting that such trials have https://usa.streetsblog.org/2017/06/26/oregons-pay-per-
mile-driving-fees-ready-for-prime-time-but-waiting-for-
been used in many cities around the world
approval/
and give ‘all stakeholders an opportunity
https://waroadusagecharge.org/ and https://caroadcharge.
to test new ways of doing things in the
com/en-us/Resources/Ongoing-Research
city and evaluating the benefits before
committing to long-term change and
72 investment’ (City of Melbourne, 2019).
Delivering benefits from
transport network pricing
Even if people accept that transport Social acceptance requires that a Polling by Infrastructure

pricing is a necessary, effective and fair substantial number of these travellers
solution to congestion, they will be more benefit from the reform. Benefits and the Victoria found that 25%
likely to support its introduction if they way the policy is communicated should of people surveyed could
believe there will be social or even be targeted at this group (Kunstler et al,
personal benefits that will flow from 2020). It is also important that the broader change the time of their
its adoption. community doesn’t perceive that they will journeys, or avoid at least
be worse off.
While the discussion below focuses on some journeys taken during
economic benefits, examples of more How do we know that there are people
general benefits include more time with out there who will respond to transport
peak time.
family, better health and environmental network pricing and change their
outcomes, and easing some of the behaviour? International experience,
negative side effects of population described earlier, shows that enough
growth (Kunstler et al., 2020). people respond to the introduction of A first step in communicating the
congestion pricing on roads to achieve benefits of transport network pricing
A credible promise that sufficient benefits significant reductions in congestion. is demonstrating that it works. As we
will flow from transport network pricing But what about Melbourne? have discussed, a full-scale trial is a
is the third part of achieving social
potentially effective way to do this.
acceptance. The feasibility of doing this Polling conducted by Infrastructure Victoria
is shown by the examples of civic leaders found that a quarter of those surveyed Not only does it show how the reformed
in political parties being elected in London could change the time of their journeys, system will work, this demonstration targets
and Stockholm with congestion pricing or avoid at least some journeys taken the travellers that will use this reformed
as part of their policies (Eliasson, 2008; during peak times. Furthermore, about system. The remainder of this section
Leape, 2006). a third reported they could choose another focuses on other ways to benefit those
mode of transport than driving during affected by transport network pricing as
A key component of this step is identifying peak times (Quantum Market Research, part of building social acceptance. There
the type of travellers who will be directly 2017). In addition, when the Tullamarine are also a number of other changes, that
impacted by the change to transport Freeway was shut, analysis showed about address other problems, which might
network pricing (Kunstler et al, 2020). 20 to 40% of commuters must have been also help with social acceptance.
This includes those who will change able to change their behavior (Kunstler
their behaviour and those who won’t, et al, 2020).
potentially paying higher prices.15
73
15 Hau (1992) shows the reason for this for the case of introducing road pricing
Delivering benefits through expanding
and reforming public transport
One way to deliver benefits to increase Expansion of the public transport system Second, it is likely that public transport
public acceptance is to package would require expenditure, but as it is for pricing reforms will not significantly affect
transport network pricing with other high demand periods and locations it would road use because relatively few trips are
benefits that also improve the efficiency also deliver some funding over time. made using public transport.
of the system. Expanding and reforming
public transport is the most important Reforming public transport pricing also Having peak pricing on public transport
element of this. This is an example has an important role to play in creating before beginning road pricing could
of targeting benefits to those whose other benefits through providing more reduce initial costs of transitioning to full
behavior can change in response choice with respect to price. For example, reform. Smoothing the peaks of travel
to reform (Kunstler et al., 2020). making buses on average cheaper than consumption reduces the need for
other modes creates opportunities for additional peak public transport services
If we are to reduce driving to reduce Victorians to save money travelling while for those substituting away from private
congestion, travellers need confidence making more efficient use of the network. motor vehicles. To the extent there is
that there are satisfactory alternatives for substitution across different modes in
their journeys to work, school and other Adopting demand-responsive parking response to differential pricing, additional
activities. Our modelling shows that road pricing will also change demand for services for particular modes may be
pricing encourages greater use of public public transport. Our modelling shows required e.g. more frequent bus services.
transport. Having a transport pricing that introducing peak pricing results in
system accompanied by public transport increased demand for off-peak services. One limitation of reforming public transport
improvements was one condition the Introducing pricing at train station car prices first is that it is likely that public
community panel required for accepting parks could increase the demand for transport prices will need to change
transport network pricing. feeder public transport services as well. again when road pricing is introduced.
With all this in mind, it is clear that reforming Nevertheless, Victorians will be better
In London and Stockholm, increased transport network pricing is likely to require prepared to adjust to road prices as
demand for public transport from introducing complementary changes in the level congestion on public transport will be
congestion charging was anticipated and even type of public transport reduced and they will also be used
and increased services were provided. services provided. to responding to more sophisticated
In Stockholm, as well as conducting a incentives when making transport choices.
trial, there was also a significant expansion There are several reasons why pricing The BWA forum also highlighted the
of public transport explicitly linked to the reform could proceed in public transport importance of staging the introduction
congestion charge. Adding extra services ahead of road pricing reform. First, travellers of transport network pricing.
as part of a trial of pricing reform could also are used to paying for public transport and
send an important signal to the community so are likely to be more accepting of more
that any shift to full network pricing would targeted public transport pricing.
be accompanied by service improvements.
74
Packaging with other
reforms and investments
While the primary focus on transport Another approach applies to reforming

pricing reform is to reduce congestion, public transport pricing. Ideally,
this reform can also occur in a way compensation for introducing congestion
that addresses the lack of incentive pricing on public transport would target
to change behaviour and unfairness existing commuters. In this case, they can
in the existing system. be identified as this information is captured
by myki. For example, with the introduction
We have identified several ways to create of congestion pricing all those who had
supporters for reforming transport pricing done at least a year of regular trips on
by targeting compensation for those public transport during peak hours could
most directly affected. The first example, receive a fixed sum of money. Doing this
most applicable to congestion pricing for road travel would be more challenging.
associated with particular areas, is to
return the funds to improve the affected Transport network pricing reform provides
area. The congestion pricing revenue an opportunity to shift to a more user-
could be used to fund more transport pays system which also enables more
or general improvements to the area. targeted incentives to reduce congestion.
The Victorian government could replace
Shoup (2005) argues, and illustrates with registration, TAC and stamp duty fees with
case studies, for returning parking revenue a distance-based charge as one way of
to improve the surrounding neighbourhoods doing this. Those who currently do not drive
(commercial or residential). This approach often or far would benefit from this change
could be applied to wherever demand- as highlighted in our modelling.
responsive pricing of parking is introduced.
This was also highlighted by the BWA forum
– in particular linking it to the provision of
additional transport infrastructure. A similar
approach was taken with London’s Ultra
Low Emission Zone.
75
Fairness would be An example of a reform in a related their behaviour. For example, travellers
area that could support the introduction who would have travelled off-peak anyway
improved if the concessions of transport network pricing on roads will switch to a system with cheaper
already available to low is reforming the fuel excise in response off-peak fares without any change in
to its decline with the diffusion of electric their travel patterns. For reduced
income and vulnerable and low fuel consumption vehicles. congestion, enough travellers in peak
Victorians for water and This was a central motivation for the pilot must change their behaviour.
of distance charging in Oregon, where
energy could be extended a fuel excise directly funds roads. One way to encourage a switch is to begin
with opt-in participation and then switch to
more comprehensively Infrastructure Partnerships Australia
opt-out participation in the new system.
has recently argued for a distance-based
to road transport.
charge to be applied to electric vehicles That is, after some time, transport network
in Australia in anticipation of declining pricing becomes the default option, so
general revenue from the fuel excise. travellers must choose to remain on the
current system. For example, existing
Indeed, if combined with replacing the myki cards could be opt-in but any new
fixed charges, distance-based charging myki card will be opt-out.
Similar benefits could also go to those for electric vehicles could be extended
in a similar form to hybrid vehicles While there has been no trial of opt-in/
making short trips if we move to distance-
voluntarily on an opt-in basis. opt-out transport network pricing, research
based pricing for public transport.
in the energy sector (Nicholson et al., 2018)
The application of a distance charge More generally, making participation suggests that making a package opt-out
could be made simpler and fairer if, with voluntary can assist with social acceptance rather than opt-in increases its uptake.16
the cooperation of the Commonwealth by, at least initially, limiting participation to
Government, the fuel excise was replaced those that benefit. In other words, to begin
with direct road user charging. Fairness reforming transport pricing more generally
would be improved if the concessions without creating losers, one strategy is to
already available to low income and make participation voluntary. Any person
vulnerable Victorians for water and energy who chooses to switch to a new form of
could be extended more comprehensively transport network pricing must have
to road transport. perceived that they will be better off than
under the existing form of pricing.
More generally, a similar pattern of
incentives, associated with distance However, opt-in approaches have several
and time of day, could be included in limitations if it is not possible to target
road user pricing but at lower levels. incentives only to those who will change
76
The final example of how transport

network pricing could be packaged
with other reforms is to link it with major One way to encourage a
service changes or infrastructure
investments (Kunstler et al, 2020). switch is to begin with opt-in
For example, a large-scale bus reform, participation and then switch
as proposed in Infrastructure Victoria’s
Five Year Focus report, coinciding with to opt-out participation in
the opening of Melbourne’s Metro Tunnel, the new system.
could be the ideal time to introduce an
inner Melbourne congestion charge.
The service improvements associated

with the Metro Tunnel could reduce
the potentially negative impacts of the 16 For an even more striking example with respect to organ
donation see www.independent.co.uk/news/long_reads/
charge. A second example is applying spain-leads-world-organ-donation-organ-transplant-health-
charges to new car parking at railway science-a8417606.html
stations of park-and-ride stops along

with improvements to bus services
connecting to these stations.
77
A future where electric vehicles are also charged – with more than just electricity
Modelling and analysis in the would raise revenue, complementing benefits of less air, carbon and noise
Infrastructure Victoria report the declining fuel excise, though not pollution. Rates could also be set
Automated and Zero Emissions directly addressing congestion at first. lower for vulnerable and lower income
Vehicles Infrastructure Advice – travellers, reducing the main source
Transport Modelling Infrastructure This proposal is similar, in some ways, of unfairness in a distance-based
Victoria (2018) suggests electric to a small-scale trial of distance-based charge. Efficient adoption and use of
vehicles could contribute more to road charging under favourable electric vehicles would be additionally
congestion than petrol vehicles due conditions – there are less likely to be encouraged by reducing or removing
to their low running costs. Hence, equity concerns associated with a the fixed registration and stamp
there is a greater risk of more road full-scale trial and electric vehicles are duty charges for these vehicles.
congestion as their numbers rise. more likely to be compatible with the
latest technologies for implementing As highlighted by our community
In addition, as highlighted in road pricing. panel, transparency is important and
Infrastructure Partnerships would be improved by the charges
Australia (2019), the fuel excise would Our work, applying the economic going not into general revenue but
be less effective as a tax reducing principles presented in Table 2 (see to a state transport authority, similar
the general revenue collection. page 31), suggests any distance- to the roads fund in New Zealand.
based charge for electric vehicles be
A distance-based charge on electric set at a lower rate than for internal
vehicles, as recommended by combustion vehicles. This is because
Infrastructure Partnerships Australia, electric vehicles feature environmental
78
08.
What
happens next?
Unlocking the full potential of our transport

network will require changes across the
board, not just to pricing. Infrastructure
Victoria will continue our work in areas
that will support a pricing system.
\ In the meantime, immediate measures can and

should be taken to reduce congestion. We have
provided a range of short, medium and longer-term
options for government to consider.
Options for Infrastructure Victoria has identified a range of options for the Victorian Government
to consider ahead of network-wide transport pricing reform. These options allow
Government Government to test, validate and refine new ways to pay for transport to ensure it
is efficient and fair, addresses congestion, helps manage demand and gets the most
out of our transport system.
Public Transport Roads Parking
01. 03. 08.

Commence randomised control trials Conduct a randomised control trial of Expand and increase the existing
of changes to public transport fares a large sample of motorists including car parking congestion levy
different types of road pricing options
targeting congestion across Melbourne
02. 09.
Introduce variable pricing for Trial dynamic pricing of selected
04. areas of on-street and off-street
all public transport trips
Apply demand managing tolls to council parking
all new freeways, bridges and tunnels
10.
05.
Trial dynamic pricing for a selection
Introduce distance-based road of new and existing carparks at railway
user charge for electric vehicles stations and park and rides
06.
11.
Conduct a full-scale trial of cordon
Apply dynamic pricing to all on-street
charging in inner Melbourne and
and council controlled parking with prices
other congestion hot spots
set to target a certain number
of places remaining vacant at all time.
07.
Price the use of all roads in 12.
the Melbourne Metropolitan area Apply dynamic pricing to all parking
at all railway station and park and ride
carparks
80
The government should, as much as In both sets of trials it is important to
What happens next?

possible, keep options alive for introducing specifically estimate the responsiveness of
transport network pricing in the future while low income and vulnerable Victorians. Each
new transport infrastructure is completed. trial could include different mechanisms to
For example, contracts with the providers reduce any unfairness potentially introduced
of new roads should include possibilities by transport network pricing reform.
for time-of-day/differential pricing.17 Ideally,
Reform of parking pricing can also proceed
demand-managing tolls would be applied
to all new freeways, bridges and tunnels. relatively easily. We note the interest of the
City of Melbourne in a pilot of demand-
For public transport, it would also be responsive parking pricing in their transport
worthwhile beginning extensive randomised strategy (City of Melbourne, 2019). The
control trials of more sophisticated public Victorian Government could support this
transport pricing, such as mode-specific pilot if it proceeds. Similarly, if other local
and peak pricing. This could possibly be governments with parking and congestion
done through mobile apps already in place. hot spots (such as Port Phillip, Yarra and
This would also provide information needed Hobsons Bay) are also interested to pilot
before full-scale reform of public transport dynamic pricing of on-street parking, they
pricing. An example is the extent to which should be similarly supported.
travelers can change their mode, route and
time of travel in response to differentiated A sample of new and existing car parks at
prices. Unless the price changes are railway stations and park-and-rides could
perceived as permanent, any responses also be selected for trials of dynamic pricing
are likely to be an underestimate of the of parking at these locations. Funds raised
response to a full-scale permanent change. in the trial would cover implementation
costs and the excess reinvested in parking
Valuable large-scale evidence could also or other local transport infrastructure
be collected from a randomised control trial services during the trial.
of different types of road pricing models
targeting congestion across Melbourne.
Though it is important to note that 17 For any road pricing component of transport network
participants will not experience the full pricing reform which interacts with roads share tolls locked
in by existing contractual arrangements, such tolls will need
benefits from such pricing unless the trial to be accommodated for. How this is done will depend on
is at full scale as occurred in Stockholm. the type of road pricing adopted
81
The pattern of successful reforms overseas If an inner Melbourne cordon is perceived
suggests that another possible next step as successful, it would certainly be

in reforming transport pricing would be worthwhile exploring if there are other
to introduce a cordon charge in inner regularly heavily congested areas to which
Melbourne as suggested by Clarke and cordon-style pricing could be applied.
Hawkins (2006) and Terrill et al. (2019b). This could include around shopping
centres or crossings of rivers or other
The City of Melbourne is also advocating for natural barriers for which there are few
general road user pricing reform (City of alternatives. These would be intermediate
Melbourne, 2019). This could either be steps towards pricing congestion wherever
done via a full-scale trial, as was done in it occurs (and not pricing congestion
Stockholm, or implemented without a trial, where it never occurs – which would

as occurred successfully in London. be most of Victoria).
While this doesn’t immediately address
congestion which is occurring across the
suburbs, beginning with inner Melbourne
has two advantages.
First, there are already extensive public

transport alternatives in place and in the
pipeline. Their benefits could be further
improved by reforming public transport
pricing. Second, as highlighted by Terrill et
al. (2019b) the consequences for fairness
are likely to be less acute. Beginning with
transport network pricing reform in the
outer suburbs would be more challenging
in both these respects (but nevertheless
should eventually be done).
82
Next steps
Infrastructure Victoria will continue
What happens next?

to model, analyse and research
options for transport network pricing
Getting involved
in Melbourne and Victoria. This will
be done within the context of reform
in the discussion
to the broader transport system.
To this end, the next phases of
You can find out more about
Infrastructure Victoria’s work will Infrastructure Victoria’s work
examine: on transport network pricing
through our website.
\ How Victoria’s transport services
are governed and the appropriateness
of incentives and decision-making
infrastructurevictoria.com.au
frameworks.
\ How we might better value and Infrastructure Victoria welcomes

allocate Victoria’s finite road space, comments on this paper and
with a particular focus on parking. contributions to the ongoing
discussion about transport network
\ Changes to transport charges that
pricing as we prepare the update to
could progressively move the system
the 30-year infrastructure strategy.
towards one that delivers reduced
congestion and better choice,
including a new approach to public
transport fares.
Following further consultation and

research, our final recommendations
for the introduction of transport network
pricing in Victoria will be made in the
2020 update of the 30-year
infrastructure strategy.
83
Appendix – Classifying
households by income group
To analyse the impacts of transport Classifying different households with

network pricing on fairness we classified different combinations of dependants

all households in the model into three into comparable groups is complicated.
equal groups (High, Middle and Low) So we follow the ABS guidelines on how
to reflect their income. In addition, we to do this – which involves calculating what
constructed a fourth group composed is called a ‘equivalised household income’
solely of those households receiving and classifying according to this.18
concessions, such as those on
a pension. This applies common sense ideas like
shared expenses means you don’t need
We didn’t use household income to to double household income when you
classify households because how well-off double the number of people to maintain
a household is depends on how many a certain lifestyle and that little children
people the income is supporting. For are less expensive than teenagers.
example, a single person with an income
of $100,000 could live quite comfortably.
However if a couple’s combined income

was $100,000 and they were supporting
three school-aged children, they would
have to be a lot more careful in managing 18 For more information see https://www.abs.gov.au/ausstats/
their expenditure. abs@.nsf/Lookup/2901.0Chapter31502016
84
References
References
Australia’s Future Tax System (2008), “Architecture of Australia’s Infrastructure Australia (2016) Australian Infrastructure Plan, Productivity Commission (2017), Funding and Investment
tax and transfer system” August 2008, available from http:// available from https://www.infrastructureaustralia.gov.au/ for Better Roads, Shifting the Dial: 5 Year Productivity Review,
taxreview.treasury.gov.au/content/Content.aspx?doc=html/ publications/australian-infrastructure-plan-2016 Supporting Paper No. 9. Available from https://www.pc.gov.au/
pubs_reports.htm (accessed 25/7/2019) inquiries/completed/productivity-review/report#supporting
Infrastructure Partnerships Australia (2019), Road User (accessed 2/8/2019)
Basso, Leonardo J. and Hugo E. Silva (2014), “Efficiency and Charging for Electric Vehicles, available from https://
Substitutability of Transit Subsidies and Other Urban Transport infrastructure.org.au/ruc-for-evs/ Public Transport Victoria (2019a), Victorian Fares and Ticketing
Policies”, American Economic Journal: Economic Policy, 6(4), Manual, July 1, 2019, available from https://www.ptv.vic.gov.au/
1-33 Infrastructure Victoria (2016), The Road Ahead, available footer/legal-and-policies/victorian-fares-and-ticketing-manual/
from www.infrastructurevictoria.com.au (accessed 30/7/2019)
Bureau of Infrastructure, Transport and Regional Economics
(2015), Traffic and congestion cost trends for Australian capital Infrastructure Victoria (2018), Five Year Focus: Quantum Market Research (2019), Infrastructure Victoria
cities, Information Sheet, November 2015 Immediate actions to tackle congestion, available from Greater Melbourne Congestion Polling
www.infrastructurevictoria.com.au
Bureau of Infrastructure, Transport and Regional Economics SFMTA (2014), SF park pilot project evaluation, June 2014
(2016), “Lengthy Commutes in Australia”, Report 144, Infrastructure Victoria (2018) Automated and Zero Emissions
Canberra ACT Vehicles Infrastructure Advice – Transport Modelling, available Shoup, Donald (2005) “The High Cost of Free Parking”,
from www.infrastructurevictoria.com.au Routledge
City of Melbourne (2019), Transport Strategy 2030, available
from https://www.melbourne.vic.gov.au/parking-and-transport/ Infrastructure Victoria (2019) Transport Network Pricing – Shoup, Donald (2006) “Cruising for Parking”,
transport-planning-projects/Pages/transport-strategy.aspx Community Panel Report, available from www. Transport Policy, 13(6), 470-486
infrastructurevictoria.com.au
Clarke, Harry and David Prentice (2009), A Conceptual Taylor, Elizabeth (2018), Transport Strategy Refresh
Framework for the Reform of Taxes Related to Roads and Leape, Jonathan (2006), “The London Congestion Charge”, Background Paper – Car Parking, May 2018
Transport, available from http://taxreview.treasury.gov.au/ Journal of Economic Perspectives,20(4), 157-176
content/Content.aspx?doc=html/commissioned_work.htm Taylor, Elizabeth Jean and Reuben van Bemmel-Misrachi
(accessed 25/7/2019) Martin, Leslie A. and Sam Thornton (2017), “Can Road Charges (2017), The elephant in the scheme: Planning for and around
Alleviate Congestion?” (October 19, 2017) Available at SSRN: car parking in Melbourne, 1929 – 2016, Landuse Use Policy,
D’Artagnan Consulting (2018), Review of international road https://ssrn.com/abstract=3055522 or http://dx.doi. 60, 287-297
pricing initiatives, previous reports and technologies for demand org/10.2139/ssrn.3055522
management purposes, for the NZ Ministry of Transport, Terrill, M., Moran, G., and Ha, J. (2019a) Why it’s time for
February 7, 2018 Millard-Ball, Adam, Rachel B. Weinberger and Robert C. congestion charging, Grattan Institute
Hampshire (2014), “Is the curb 80% full or 20% empty?
Duranton, Gilles and Matthew A. Turner (2011) “The Assessing the impacts of San Francisco’s parking pricing Terrill, M., Moran, G., and Ha, J. (2019b) Right time, right
fundamental law of road congestion: Evidence from US Cities”, experiment”, Transportation Research Part A, 63, 76-92 place, right price, Grattan Institute
American Economic Review, 101(6), 2616-2652
National Transport Commission (2019, Regulating government Transurban (2016), “Changed Conditions Ahead: The
Eliasson, Jonas (2008), “Lessons from the Stockholm access to C-ITS and automated vehicle data, August 2019 transport revolution ahead and what it means for Australians”
congestion charging trial”, Transport Policy, 15, 395-404 Melbourne Road Usage Study, available from https://
Nicholson, Moira L., Michael J. Fell and Gesche M. Huebner changedconditionsahead.com/the-study/
Eliasson, Jonas (2014), “The Stockholm congestion charges: (2018), “Consumer demand for time of use electricity tariffs:
An overview”, CTS Working Paper 2014:7 A systematized review of the empirical evidence”, Renewable Turvey, Ralph and Herbert Mohring (1975), “Optimal Bus Fares”,
and Sustainable Energy Reviews, 97, 276-289 Journal of Transport Economics and Policy, 9(3), 280-286
France, N.J. and G. Currie (2019), “Exploring the performance
of road pricing implementation factors – implications for Parry, Ian W.H. and Kenneth A. Small (2005), “Does Britain Victorian Department of Treasury and Finance (2010), Review
Melbourne”, Proceedings of the Australasian Transport or the United States have the right gasoline tax?” The American of the effectiveness of the congestion levy, May 2010
Research Forum 2019 Economic Review, 95(4), 1276-1289
Winslott-Hiselius, Lena, Karin Brundell-Freij, Åsa Vagland and
Hau, T.D. (1992), “Economic Fundamentals of Road Pricing: Pierce, Gregory and Donald Shoup (2013), “Getting the Camilla Byström (2009), “The development of public attitudes
a diagrammatic analysis” World Bank Policy Research Prices Right”, Journal of the American Planning Association, towards the Stockholm congestion trial”, Transportation
Working Paper Series WPS 1070, Washington, DC: The 79(1), 67-81 Research Part A, 43, 269-282
World Bank, 1992
86
This publication may be of assistance to you,
but Infrastructure Victoria and its employees
do not guarantee that the publication is without
flaw of any kind or is wholly appropriate for your
particular purposes and therefore disclaims all
liability for any error, loss or other consequence
that may arise from you relying on any information
in this publication. You should seek appropriately
qualified advice before making any decisions
regarding your particular project.
Printed on 100% recycled paper
March 2020
© Copyright Infrastructure Victoria 2020
Except for any logos, emblems, trademarks,

figures and photography, this document is made
available under the terms of the Creative Commons
Attribution 3.0 Australia licence. It is a condition
of this Creative Commons Attribution 3.0 licence
that you must give credit to the original author,
who is Infrastructure Victoria.
This document is also available at

infrastructurevictoria.com.au.
ISBN 978-1-925632-45-3 (Print)
ISBN 978-1-925632-46-0 (pdf/online/MS word)

Good Move: Fixing Transport Congestion - Infrastructure Victoria

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Good Move: Fixing Transport Congestion - Infrastructure Victoria

Uploaded by

Copyright:

Available Formats

March 2020

Infrastructure Victoria is an independent

\ preparing a 30-year infrastructure strategy

\ providing written advice to government

\ publishing original research on infrastructure-

Infrastructure Victoria also supports the

The aim of Infrastructure Victoria is to take a

Infrastructure Victoria does not directly

Infrastructure Victoria acknowledges the

Executive summary 04 05. How transport network pricing

Options for Government 08 Modelling transport network pricing 41

Pricing delivers highly positive outcomes for Melbourne 47

01. Introduction 11 Impacts on fairness can be managed 56

Victoria’s transport system under pressure 12

We need a new approach 13 06. Parking pricing reform 65

02. Three big problems that A new approach to pricing parking 67

are getting worse 15

Delivering benefits from transport network pricing 73

Results of the reforms 26 Packaging with other reforms and investments 75

04. Transport network pricing 08. What happens next? 79

change, things 3.5 time & money

$10.2 billion In time,

Under transport network pricing with discounts:

up to Majority of users will experience

What happens if we’re willing to change our behaviour?

Around 8% reduction of time Victorians

Public Transport Roads

01. 03. 05.

Options for Government

\ Prices regularly reviewed and revised 12.

\ Dynamic pricing as described in option

Victoria’s transport system is struggling to meet demand and

\ Travel is taking Victorians longer. \ We need a new approach. Our research

Travel is taking longer, with more variable

travel times1. On public transport, peak

to jobs and amenities.

Investment in transport infrastructure

While roads and public transport in inner

Infrastructure Victoria has examined

International experience shows that

Infrastructure Victoria’s research and analysis

are encouraged to shift to other modes

To summarise, transport network pricing

Three big problems

We see three major problems with Victoria’s transport system.

population is likely to grow substantially

Duranton and Turner (2011) apply

Three big problems that are getting worse

\ Metropolitan public transport fares \ The wide availability of free and

‘Cheap’ doesn’t equal ‘fair’

Unless a product is supplied to meet For example, if congestion makes travel

Three big problems that are getting worse

How people pay

International case studies show that changes to transport pricing

We summarise these reforms in Table 1.

In each of these places, congestion was

How people pay around the world

A second design feature of road pricing Road usage charges implemented

charging was introduced as a pilot but Parking charges

3 All information provided in this section about the reviewed

charges fares based on distance, peak periods.3 2 w

Trials across Melbourne – the Melbourne Road Usage Study (MRUS)

Our research shows that the design and implementation of transport

\ These principles lead to a pricing \ The community is also open to