ROAD USER CHARGING CONFERENCE ASIA PACIFIC
“THE POLITICS OF INTRODUCING ROAD USER CHARGING IN AUSTRALIA”
FOUR POINTS by SHERATON, SINGAPORE
5 October 2023
SENATOR, THE HON BRIDGET MCKENZIE
SHADOW MINISTER FOR INFRASTRUCTURE, TRANSPORT AND REGIONAL DEVELOPMENT
LEADER OF THE NATIONALS IN THE SENATE
SENATOR FOR VICTORIA
SPEECH HIGHLIGHTS/KEY POINTS
- The imminent High Court decision on Victorian road EV road user charges will put pressure on the Albanese Government to declare its policy direction on a national charge.
- Labor’s current policy is grossly inequitable forcing Australia’s poor, vulnerable and geographically remote to bear the burden of building and maintaining our roads, while giving wealthier Australians a free ride.
- Announces the key principles that will underpin the Coalition’s policy direction on road user charging.
- Urges the Federal Government to reveal the true cost of fuel excise charges by displaying them on fuel dockets.
- While road user charges are being trialled around the world, no country in the world of Australia’s size, population spread has successfully introduced a nationwide road user charging system.
Thank you for the introduction and for the invitation to speak at this inaugural and important Road User Charging conference in our part of the world.
Context is important and I must begin my remarks today by explaining a little about myself, about my country Australia, and the current political circumstances we find ourselves in.
Firstly, I am a representative of the Commonwealth of Australia’s Parliament – elected to the Senate as one of the 12 Senators representing the State of Victoria.
I was formerly a cabinet minister in the Australian Government, serving in a variety of portfolios, including Agriculture, Emergency Services, Regionalisation, Regional Communications and Regional Education, and am now in Opposition with responsibility for developing future infrastructure and transport policy.
I am a representative from The Nationals – a party that is almost unique in the world in that we are a geographic rural party – which means that all our MPs’ primary responsibilities are to represent the eight million Australians who live outside our large capital cities.
The Nationals are a centre-right political party, and I am more right than centre.
To put it simply, we were formerly called “The Country Party” – a party that for more than a hundred years of its existence – has been very much focussed on the needs of people who live in the rural and regional parts of our nation.
The Nationals are the second party in all Coalition Governments since 1949.
Australia’s other major political force (and the current government) is the centre-left Australian Labor Party.
As if that wasn’t complex enough, Australia has a federated national political system with six states and two territories. And our Constitution provides both our federal and our state governments with specific powers and responsibilities.
As a people, the Australian public are sceptical of centralised power and are inherently pragmatic.
The same public scepticism and need for creative, pragmatic solutions still drives public policy today and will necessarily guide implementation of any road user charges in Australia.
For many years, bureaucrats and academics have debated road user charges in Australia, primarily as a means of raising taxes to pay for the incredibly expensive cost of building roads.
However, this is an issues that has been in the too hard basket. Its too politically risky.
Australians are also sceptical of new taxes.
There is also the challenge that in Australia, while the Federal Government has the majority taxing powers, it is the states that are primarily responsible for building, maintaining and owning road networks.
This leads to the perverse outcome where the Federal Government can provide the majority of the road funding, but actually lacks the authority to call in the bulldozers and get the project started.
Therefore, federal governments have historically had little incentive to wear the political acrimony of imposing a new tax – road user charge – to help the states fund and build the roads they are responsible for.
So, in Australia, the use of direct road user charges has generally been limited to privately owned and operated toll roads, which have been built by the private sector under contracts with state governments in congested capital cities like Sydney and Melbourne.
Victoria, my home state, is the first state in Australia to introduce an electric-vehicle road user charge.
The Victorian Road User Charge is a brilliant example of how NOT to design such a scheme. More about that later.
Many of you have visited Australia, but for those who have not, it is important to understand some important geographic and cultural differences about our country that make it unique in the world.
Australia is a large country, more than 10,500 times the size of Singapore, with a relatively small population, but also one of the most urbanised countries in the world.
More than 70 per cent of the population live in capital cities, all of which are located on the coast.
An extraordinary 85 per cent of the population lives within 50km of the coast.
We drive on the left-hand side of the road, and we love the outdoors.
The top 10 best selling cars in Australia are dominated by utes, 4WDs and SUVs. In fact, 36 per cent of new Australian vehicles sold last year were either 4WDs, larger SUVs or utes.
Utes (or as Americans call them, pick-ups) are so ubiquitous in Australia that we even have our own festival: the Deniliquin Ute Muster. Like Glastonbury, but for utes.
The reason for this is that many Australians use their work car for family and weekend activities.
In Europe, for example, tradespeople typically own a closed van.
But the ute doubles as a vehicle that can take the family camping, fishing or to the beach or sport at the weekend.
Electric vehicles are indeed becoming popular – especially so in Australia’s most affluent suburbs.
But just 4 per cent of Australians recently surveyed said they would be keen to buy an electric vehicle as their next car.
And even though we buy around 1.2 million new vehicles each year, the majority of Australians will never buy a new car during their lifetimes.
The average age of a vehicle is around 9.8 years.
Many Australians, especially in the regions, have to travel great distances to work, to school, to participate in sporting activities and attend medical appointments.
Utes, Four-wheel drives (4WD) and SUVs are a pragmatic option for families.
Roads in regional Australia are often unsealed or dangerous.
There is a lot of wear and tear on vehicles, for which bigger cars are better suited.
In fact, 56 per cent of Australia’s total road kilometres are unsealed dirt and gravel roads.
It is estimated there are 10 million collisions with animals on Australian roads each year, most of which go unreported, of which about 5 million are kangaroos and wallabies, but also wombats and occasionally emus and a lot of birds.
It is no exaggeration to say that most families who have lived in regional Australia have, at some point in their lives, hit at least one kangaroo.
Even in the nation’s capital, Canberra city, dodging kangaroos is a potential daily hazard.
If you hit a kangaroo doing 80-100 kilometres per hour – you want to be driving a large car!
Like other countries, Australia is working through the stages of transitioning to a low emissions transport sector.
Both major parties in Australia are committed to lowering emissions. There is a bipartisan agreed ambition if you like, to achieve net zero emissions by 2050.
Australia became a signatory to the Paris Agreement under the former Coalition Government, of which I was a part.
This followed a long, protracted and sometimes painful debate in Australia about the degree to which we as a nation, who derive so much of our wealth from mining and agriculture, would seek to transition away from fossil fuels, recognising as we did, that this would harm our economy by forcing emissions reductions on our key industries and communities.
As outlined above, Australians want and need cars with power and grunt – for family and for work.
The transition to low emission and electric vehicles as part of our 2050 net zero commitment must address that need.
Amongst the many challenges to achieving net zero in Australia, a concern for governments is the loss of tax revenue we use to fund our roads through fuel excise.
Fuel excise, once the core component of land transport funding, is increasingly being eroded by the adoption of more fuel-efficient vehicles, as well as hybrids and electric vehicles.
Fuel excise is levied on each litre of petrol.
It raised $13.7 billion in revenue last financial year.
As Australians shift from cars with internal combustion engines to hybrid and electric cars, the Australian Government’s Intergenerational Report 2023 predicts fuel excise revenue to fall from 0.88 per cent of GDP in 2033-34 down to 0.25 per cent, or even as low as 0.01 per cent, by 2062-63. Falling to practically nothing.
So, the policy debate in Australia around road user charges has shifted from one of trying to find a new mechanism to fund increasingly expensive roads, to replacing what is likely to be the rapidly diminishing existing fuel excise.
However, this is not only a question about protecting government revenue for road funding – it is a critical equity question.
The current government seeks to electrify 80% of our passenger fleet by 2030. I have been very clear about the principles that will guide our approach:
- The Coalition supports a low emissions transport sector to contribute towards achieving Net Zero by 2050.
- Australia’s pathway to a low emissions transport sector will be technology agnostic (not just electric vehicles) – hybrid electric vehicles, hydrogen, bio-fuels and lower carbon fuels (drop in fuels), other technologies not yet commercialised for vehicles. We want to ensure that the best solutions are developed and brought to market in Australia.
- The Coalition support Australians having the choice of vehicle they wish to drive – and should not have to pay more as a result of government policy.
- The Coalition will work to ensure that the vulnerable and geographically isolated will not be discriminated against by the transition to a low emissions transport sector.
- No retrospectivity. The Government should not undermine the investment people have made in their existing vehicles.
- The Coalition believe equity in contributing taxes to fund road maintenance is a key principle.
Every time a high-net worth Australian citizen buys an electric vehicle, they immediately stop paying fuel excise and stop contributing towards that cost of maintaining our roads.
All of a sudden, instead of all road users helping fund their share of using the roads, some wealthy people are able to opt-out of the fuel excise, leaving a larger burden on lower income families, and those in regional and outer suburban Australia.
As a result, with each passing week, the fuel excise in Australia becomes less and less equitable.
And the implementation of a road user charge becomes more necessary and more inevitable.
The Australian Productivity Commission recognises new sources of funding will be required to replace the progressive erosion of fuel excise revenue, and has identified critical issues with the current system of road pricing:
- no investment signals are available to indicate where new road infrastructure should be built or where capacity increases are required;
- price signals are not utilised to limit congestion, which cost the Australian economy A$24 billion in 2018-19;
- does not account for the differential damage to roads by vehicles of varying weights, or the resistance of different types of road surfaces to damage; and
- a comprehensive framework that balances distributional and efficiency goals with meeting the fixed costs of construction is entirely absent.
Implementing a comprehensive, mandatory Road User Charge for light vehicles has never been attempted in a country as vast and sparsely populated as Australia and probably for good reasons.
Indeed, it is no accident that compact, and highly urbanised Singapore is the first, and to date, the only country to successfully implement a mandatory, nationwide Road User Charge for light vehicles. Successfully, with wide public support. I note the Certificate of Entitlement increases announced recently were well received, and I will be discussing these and other issues with Acting Transport Minister Chee tomorrow.
Outside of Singapore, mandatory light vehicle road user charges are restricted to densely populated urban areas, including London, Stockholm, Gothenburg, and Milan.
Notably, Oregon in the United States has introduced the opt-in ‘OReGO’ scheme, which allows drivers to replace state gasoline tax with their road user charge.
But OReGO remains a small-scale scheme with only approximately 2,100 vehicles registered.
None of these examples provides a blueprint that can be readily adapted to the unique Australian context.
Note the following features of my country.
The majority of Australia’s road network is both unsealed and non-urban.
In 2018, the total length of the Australian road network was 880,000 kilometres – this is the equivalent of driving around the equator 22 times or around the planet Jupiter twice!
The unique makeup of the Australian road network presents particular challenges for implementing a Road User Charge, which are quite different from where Road User Charges have been implemented or trialled previously.
Unlike Singapore, the primary purpose of an Australian Road User Charge would be revenue replacement, to fund the maintenance and upgrade of the road network. The congestion challenges of our major cities could be addressed by other policy levers.
Vehicle ownership is very high by global standards, with 757.4 vehicles per 1000 persons in 2016.
Driving is often a necessity, not a choice.
These considerations must be taken into account when designing a road user charge in Australia.
At this time, among the Australian states and territories, only Victoria has introduced a road user charge which applies to Zero and Low Emission Vehicles (ZLEVs). The ZLEV category includes battery electric vehicles (BEV), plug-in hybrid electric vehicles (PHEV), and hydrogen vehicles (HEVs), but excludes conventional hybrids.
Victoria’s scheme represents an impediment to introducing a nationally consistent road user charge. As one state has gone ahead of the others.
By acting alone, there is a genuine risk that over time there could be up to eight different road user charge regimes in effect across the country, all with their specific quirks.
The complexity for Australian families and freight companies of complying with eight different schemes would be a red tape nightmare.
The validity of Victoria’s scheme is being challenged in the High Court of Australia on Constitutional grounds, in Vanderstock & Anor v. State of Victoria.
In simple terms, the case turns on whether a State Government is lawfully able to impose such a road user charge, or if that power rests solely with the Commonwealth.
This is an important legal test case which will set the direction, not only of road user charges, but also road funding, long into the future.
The case is currently before the High Court, whose ruling could come at any time and until it does any policy proposal will be mere speculation.
Meanwhile, despite the forecast drain on fuel excise revenue, the current Labor Government claims no intention of pursuing road user charges.
Unfortunately, with fuel excise essentially becoming an optional tax for those who are rich and living in our capital cities, but mandatory for the rest of us, the need for reform is becoming urgent.
This will become even more important if Labor’s policy to implement a fuel efficiency standard on cars results in higher costs for both new and second-hand cars, which will have greatest negative impacts on the regions and the poor.
The practical reality is roads have to be built, roads have to be maintained & roads have to be paid for in a country like ours.
To keep people safe and keep freight moving.
Australians, like people in other countries, are paying very high petrol prices right now.
However, if the Federal Government’s ambitious trajectory of EVs and LEVs continues, but without a workable, integrated and equitable road user charge system, the consequences will be dire.
Our Government will be a Reverse Robin Hood.
They will be forcing a higher proportion of road charges and higher car prices and less choice, on the poor, the remote and the vulnerable to support the climate conscious rich in our cities.
Our most fundamental ethos as a country is that we “share the load” – our egalitarian values demand that we provide a “fair go” for everyone.
It is one thing for our government to accelerate our net zero ambitions.
But without the foundational policies in place, electrifying our nation and transport system, will fail.
To help prepare for the new system, drivers should be informed of the tax they are currently paying by including the fuel excise on their receipt every time they buy petrol.
This would a great advance in taxpayer transparency.
We do this with GST currently.
Reforming tax in Australia is hard.
It often comes at a political cost.
But the current fuel tax system for funding roads is broken.
It is unfair and inequitable because the rich living in the capital cities are able to avoid it, and the poor and those in regional areas will be left paying the bill for decades to come.
It is time for Australia to consider the switch to a road user charge.
Indeed, the need is urgent.
Done correctly, implementing a road user charge could actually help redress many of the distributional and equity problems that have long existed with the fuel excise – especially for the poor and those in our regions.
In addition to applying a long overdue penalty to inner city congestion.
The current Australian Government may not have an appetite for a national road user charge, but whether it happens this year or next decade, this is an inevitable challenge the nation needs to confront.
 Our World in Data, n.d.
 Parliamentary Library, Parliament of Australia, 2023