SUBMISSION TO THE NATIONAL TRANSPORT COMMISSION
RE INCREMENTAL PRICING FEASIBILITY
Dr Philip Laird FCILT Comp IE Aust University of Wollongong February 2009
1.
The value of “pricing for productivity” was noted on page 18 and page 28 of the
National Transport Commission (NTC) 2006 Annual Report. As noted in the current NTC
report on incremental pricing, CoAG at its April 2007 meeting endorsed a three phase
reform plan for road infrastructure provision. In addition, in February 2008, the Australian
Transport Council agreed to six transport policy principles including "Infrastructure
pricing: sending the appropriate signals to influence supply and demand for infrastructure."
2.
During the 1980s, truck productivity increases were sometimes tied in with
improved road cost recovery. This was the case when NSW approved both higher mass for
semitrailers and the use of B-Doubles in the mid to late 1980s. In 1989, NSW annual
permit and registration fees of $12,650 a year in 1989 for an 8 axle B-Double were in
place.
During the 1990s, in the interest of national uniformity, in NSW (and also under
the Federal Interstate Registration Scheme), road user charges for B- Doubles were
reduced. With Consumer Price Indexation, the 1989 NSW B-Double combined
registration/permit fee would be about $21,680 in 2008. This is more than two and a half
times more than July 2008 NTC charge for an 8 axle B Double of $8041.
In the present decade, the NTC has made conditional proposals for improved truck
productivity, sometimes only with limited attention to pricing. These proposals include
quad axles, semi-trailers fitted with twin-steer axles to carry heavier loads, 26 metre BDoubles, Concessional Mass Limit “reform” (and as noted on page 17 of the 2006 Annual
Report of the NTC) “B-triples on appropriate sections of the road network.”
As the 2006 Productivity Commission Road and rail freight infrastructure pricing
report noted, the ‘high end’ truck combinations will increasingly under-recover their
attributable road damage.1 It is desirable that this situation be addressed, and, that any
conditionally approved truck productivity gains can be shared with the road agencies.
1
The 2006 Productivity Commission report on page 125 notes that a 9 axle B - Double
hauling the 75 th Percentile distance of 227 500 km) in a year would pay $34,200 and
have, under the NTC’s methodology, an allocated cost of $57,200.
2
3.
Reference is made on page 1 of the summary that "an incremental pricing scheme
would be based on full cost recovery of the additional road wear and costs associated with
higher loads which would contribute to effective competitive neutrality between road and
rail." In addition, there is a guiding principle to align any new scheme with the PAYGO
(Pay as you go) approach.
Here there is an immediate discrepancy. If a company wants to build a railway, it
needs to secure funds in advance and then after construction seek to recover these funds
from the traffic that the railway can attract.2 This is not the case with PAYGO. Whilst the
present situation for rail continues, full competitive neutrality between road and rail is not
possible. However, mass distance pricing at appropriate levels would lead to an
improvement in competitive neutrality between road and rail for freight.
4.
Setting aside the above discrepancy, as noted on the website of the NTC (accessed
13 October 2008) was the question re road user charges Is the NTC calculation accurate?
“The Productivity Commission independently audited and endorsed NTC’s charges
methodology noting that it is “conservative” by international standards (i.e. resulting in
lower charges).”
Elsewhere, this writer has noted that there appears to be three notable broad groups
of estimates for road system costs attributable to heavy trucks3:

Conservative or NTC - as per the National Road Transport Commission (NRTC)
first and second determinations and the NTC third determination.

Intermediate - including the former Inter-State Commission findings4 during the
1980s, the 1990-91 Over-Arching Group (OAG) recommendations and NSW
permit fees for heavier semitrailers and all B Doubles in use to 30 June 1996.

High, or "user pays" - including the Bureau of Transport and Communications
Economics (BTCE) 1988 report5 noted in the draft report of the Productivity
2
Indeed, this is currently the situation with the Alice Springs to Darwin railway (or at least
the majority of the capital cost raised by the private sector), and Fortescue Metal Groups
Pilbara Iron ore railway opened in 2008.
3
Road pricing in Australia – too much or too little, P Laird, Australian Road Summit,
February 2007
4
Inter-State Commission (1986) Cost recovery arrangements for interstate transport, to
(1990) Road use charges and vehicle registration: a national scheme Canberra
5
BTCE (1988) Review of road cost recovery, Canberra
3
Commission, McDonell's methodology (NSW) (see for example6), and ongoing
New Zealand Road User Charges.
The difference between road system costs attributable to articulated trucks under
the 2005 NTC model and using Macdonell's Methodology is approximately $1.5 billion
per year. The conservative methodology used by the NTC and the delays in passing on
improved road cost recovery from heavy trucks impacts on competitive neutrality between
road and rail for freight (particularly non bulk and/or line haul freight).
5.
The January NTC 2009 report notes the proposed use of a standard axle repetition
kilometres or SAR-kilometres, and that standard axle repetitions when an exponent of four
is used (fourth power law) is commonly referred to as equivalent standard axles (ESAs).
A fourth power law is considered appropriate, and is understood to be used in the
New Zealand Road User Charges scheme.
The Australian Road Research Board in
19887 reviewed the fourth power law, and related results from Australian tests using an
Accelerated Loading Facility. The general conclusion is that the fourth power law
represents the best available single tool for estimating pavement wear due to traffic but it
must be used with care and within its limitations.
6.
For some years now, the NTC has used a level of four (4) cents per ESA km for
special purpose vehicles (as noted in the annual indexation review of registration charges)
and this has not been increased for several years now. A 2004 ARRB Transport Research
Report Estimates of unit road wear cost No 361 after detailed analysis gave two estimates
using different approaches of unit road wear unit rates of 7.49 and 8.85 cents per ESA km. With indexation, the lower bound would now exceed 8 cents per ESA-km.
7.
The use of special purpose vehicles with mass and/or dimension concessions are
often advocated, as per the case of Quad Axle groups (NTC paper late 2006) on the basis,
that they “ …will reduce the number of trucks needed to service the freight task”. This
type of reasoning has been offered for at least two decades, going back to the former
6
Laird PG Freight transport cost recovery in Australia, Australasian Transport Research
Forum, Gold Coast
7
Kinder D K and Lay, MG (1988), Review of the Fourth Power Law, Australian Road
Research Board Internal Report as quoted Laird, PG Road cost recovery in Australia and
New Zealand, Transport Reviews, Vol 10, 1990, p 215-227
4
NAASRA proposals to lift the GVM of a six axle articulated truck (from 36 to 38 to 41 to
42.5 tonnes and beyond) and also for the introduction of B-Doubles during the late 1980’s.
In some cases, this has resulted in fewer truck movements albeit at the expense of
accelerated road wear and tear with a demand fore more road capacity and stronger
bridges. In other cases it has resulted in more ‘loads on roads’ as the higher productivity
trucks have been able to capture freight previously moved by rail or sea. This not only
results in more road wear and tear but also appreciable external costs that include road
fatalities involving articulated trucks (particularly in non-urban areas) and noise and air
pollution (noticeably in urban areas). Examples of modal shifts include a steady drift of
long distance petroleum product movements from sea to rail and later to road.
8.
Australia, as well having the highest road freight per capita in the world (net tonne
km per person), is also home to many of the worlds most productive trucks. In addition,
Australia’s truck mass legal limits are generous by world standards.
9.
The discussion paper does not mention the New Zealand Road User Charges
scheme. This mass-distance scheme is an incremental one that has been in successful use
for some 30 years now. Australia could well learn from aspects of this scheme.
10.
Although the “Twice the Task” concept does not have the urgency it had up to
2008, there is an increased recognition that Australia should be lessening its dependence
upon imported oil, and reducing carbon pollution from transport. This recognition includes
the qualified 2008 ATC objective (one of six) to "… minimise emissions and consumption
of resources and energy."
These objectives would be assisted by improved road pricing for heavy trucks with
less external costs. It is noted (Page 30 of the January 2009 NTC paper) that "the issue of
externalities will be dealt with in the development of the regulatory impact statement in
phase two of the COAG road reform plan taking into account of this review."
11.
In conclusion, it is recommended that the incremental pricing scheme with mass -
distance charging be further developed, with improved levels of road cost recovery. It is
also recommended that further road productivity gains be put on hold until a suitable
scheme is developed.