LUKE FRASER. Good, bad and ugly of congestion charging in Melbourne.

Attention to Stockholm’s congestion charging system should be seriously studied in Australian cities. … In roads, we have a pricing crisis rather than an infrastructure crisis.

As reported recently in the Australian Financial Review[i], a 30-year strategy outlined by Infrastructure Victoria (IV) earlier this month made road pricing reform its top priority. This was immediately shrugged off by the State government. In fact, for the avoidance of any doubt, the Premier had rejected the mooted road reforms – including a congestion charge for Melbourne – weeks earlier during the draft report stage; the State Opposition leader said it sounded like something ‘dreamt up at a Fitzroy dinner party[ii].

In this way, the report and its reception offers a nice microcosm of where Australia is at in all facets of road reform –the good, the bad and the ugly: solid public policy effort which learns from good ideas elsewhere, a growing vox pop suspicion that things are broken and corresponding appetite for reform, a bureaucratic preference for more status quo – and our Federation model not being employed to strengthen political resolve or foster reform.

First, the good: in a way not brought together before in this country, IV’s report presented the city congestion charging concept in three dimensions. Analysis considered a plausible Melbourne charge could reduce road congestion in that city back to much more bearable levels. Conversely, it presented a bleak picture of the future cost of unchecked Melbourne congestion thirty years hence: c. 30 kilometre per hour average commuter speeds and $10 billion lost from the economy.   Illuminating motorist survey sentiment showed material support for a Melbourne congestion charge or similar – both Melburnians and regional motorists surveyed appear to agree on the need. The report’s finding that a forecast $46 billion in transport spending over the next three decades won’t budge congestion much from current levels might convince even former Prime Minister Abbott that building more motorways isn’t something worth being remembered for. As Dr Michael Keating AC put it some years ago, we may have a pricing crisis, rather than an infrastructure crisis. Rationing transport assets via genuine reform is a far better political legacy.

The report made only brief reference to the Stockholm congestion charge experience. More might have been said of it, because of all congestion charges to date, Stockholm’s is larger in scale, perhaps more supported by users and more impressive in its scale of achievements.

In 2006, Stockholm trialled a city congestion charge for six months before putting the project to a referendum. At the time, only three per cent of media articles about the charge were considered positive, with the rest split between either neutral or negative. The Swedes aimed publicly for the project to deliver 10-15% reductions in traffic across the city’s charging cordon: within weeks of operation they had achieved 22 per cent, creating a 30-50 per cent reduction in congestion levels[iii]. To put this change in context, that is roughly twice the level of traffic reduction that Melbourne experiences during most school holiday breaks[iv]. Early analysis of the trial (using actual trial data, not theoretical modelling) revealed that the project would repay its total investment in social benefit terms in just four years[v]. The funds raised by the charge would go towards urban road projects – this kept drivers onside. Public opinion shifted.

Almost a decade after opening, Stockholm’s congestion charging benefits appear to be enduring despite population and car growth; vehicle emissions are down significantly and the retail sector has not died. What was originally a politically-toxic Social Democrats-Greens policy soon won a popular referendum vote; later, Conservative-Liberal Swedish governments even sought to expand the charge. One of the lessons from Stockholm was that the initial government modelling of the scheme worked reasonably well – in fact, it underestimated the actual benefits[vi]. Like other State capitals Melbourne already has good city transport models in place; the IV report already suggests good benefits for Melbourne from a form of cordon charging. Every city is different of course, but Stockholm’s experience suggests backing an educated judgement can work.

With the good in IV’s report came some bad: with due vagueness, the report suggests that eventually direct road pricing would extend further to other roads, possibly all roads.   Little worthwhile detail was offered here. An earlier post dealt with the great damage that would be caused by charging full costs for all roads[vii]. This is simply the road bureaucracies fishing around for models which will generate them far more revenue without having to visit any serious competition reform upon themselves, as all other utilities have endured over the past two decades, mostly to good effect.

Finally, to the ugly: the political response to Infrastructure Victoria’s road reform recommendations. Victoria’s government and opposition ruled it out immediately. Canberra looked on, probably quietly relieved that somebody else was in the gunsight for a change. This is how the Federation tends to operate these days: a State shirks a meaningful but supposedly risky economic reform; instead of entering the space to provide leadership, the Commonwealth maintains a convenient silence.

Under status quo, this is where IV’s efforts will end: our road agencies will brief their Commonwealth and State masters that they are ‘very close’ to a superior direction on universal road pricing (just as they have been briefing said ministers for the past decade) and the Victorian government will distract the public and press away from congestion charging with talk of the next shiny transport mega-project.

IV’s report provided a great service in identifying the ‘what and why’ of congestion charging for Australian cities, but did little to consider the ‘how’: in our Federation system, lobbing such a large and complex recommendation to a single State Premier was probably never going to succeed. The Commonwealth perspective demands consideration – not because the Commonwealth owns (or wants to own) capital city roads, but because the economic performance of our major cities has a very large impact on overall national economic performance – and the Commonwealth always shoulders a large portion of blame or praise for that. Canberra also pays out billions to capital city infrastructure projects each year. Too many of these outlays have been duds. More duds are in prospect: as John Austen wrote recently, Sydney metro could cost almost as much as our new submarine fleet, yet might actually constrain the capacity of the existing Sydney commuter rail network, rather than enhance it[viii]. Canberra has a real stake in creating systems that lead to more efficient urban transport.

Rather than abandoning IV’s helpful report to the bureaucratic quicksand, we could choose to spend time considering how capital city congestion charging might be encouraged in an Australian setting. Australia’s Federation model is not quite the one Stockholm faced in trying to implement their congestion charges, but there are lessons to learn there. Some attention to how similar helpful charging systems to Stockholm’s could be ushered into Australia’s biggest cities should be a priority for those with an interest in making these places work better. That should include Canberra.

A forthcoming post will examine these matters further.

Luke Fraser is the founder and principal of a transport policy and investment advisory. In 2012 he was appointed to the board of the Prime Minister and Premiers Road Reform Project. Prior to this he was a national freight industry chief executive.



[iii] The Stockholm experience is nicely summarised in Eliasson, Jonas, The Stockholm Congestion Charges, An Overview Working Paper 2014:7, Centre for Transport Studies, Stockholm (2014)

[iv]See Infrastructure Victoria’s background paper on road pricing (Nov 2016) p.41

[v] Eliasson, Jonas, Cost-Benefit Analysis of the Stockholm Congestion Charging System Transek AB Sweden (2006)

[vi] Op Cit Eliasson (2014)