Road and Rail Freight Infrastructure Pricing

The Productivity Commission’s inquiry report into the ‘Road and Rail Freight Infrastructure Pricing’, was tabled in Parliament in April 2007. The Commission had been asked to inquiry into the costs of freight transport infrastructure on major road and rail networks and options for transport pricing reform. The inquiry would assist COAG to implement efficient pricing of road and rail freight infrastructure to maximise freight transport efficiency and net benefits for the community. Although the Commission concluded that heavy trucks, in aggregate, had been paying their way under the PAYGO system, and that competitive distortions between road and rail were limited, it also found that pricing and regulatory arrangements hampered the efficient provision and productive use of both road and rail infrastructure. The main efficiency losses with current road charging arrangements derive from the averaging of costs and charges under PAYGO, and the disconnect between road revenue and spending decisions. The Commission proposed a sequential approach to reform to be overseen by COAG, this involves: improvements to the PAYGO system, coupled with regulatory reform and improved investment decision-making processes; then incremental pricing for trucks currently excluded from parts of the network, and institutional reforms, before moving to introduce wider location-based pricing. The Commission stressed that each step should be preceded by detailed examination of costs, benefits and distributional impacts, and identification of appropriate adjustment mechanisms. For rail, the Commission recommended a range of reforms to overcome the legacy of a century of inconsistent state based regulation. It also concluded that there was scope to moderate rail access regulation and that corporatisation principles should be more strictly applied.