1. Road User Charging Has Set The Wheels Of Reform In Motion

The Introduction of a road user charge for electric vehicles shows reform is possible.

In 2019, Infrastructure Partnerships Australia released a policy paper recommending the introduction of a RUC for electric vehicles.² This illustrated the generational opportunity for governments to make the way Australians pay for roads fairer, more efficient and more sustainable.

Our model would provide an alternative source of road funding to fuel excise, which has always been a blunt instrument and is in structural decline. It would also mitigate the imminent risk that, as uptake of ZLEVs grew and fuel excise from petrol and diesel continued to decline, there would be no link between the demand and cost of road use. The window of opportunity for genuine road reform was closing rapidly.

This paper was the catalyst for reforms across Australia prior to the High Court of Australia’s decision, where:

• The Victorian Government, through Treasurer Tim Pallas, drove the case for change and led the world by being the first to legislate and implement the changes.

• The New South Wales Government followed suit, with the support of the then-opposition, but delayed commencement of a RUC until July 2027 or when ZLEVs would comprise 30 per cent of new car sales – whichever would come sooner.

• The Government of South Australia was the first to announce a RUC for ZLEVs in late 2020, and changes in the state were legislated a year later – though this was repealed by the next government in early 2023.

• The Governments in Tasmania and Western Australia announced they would undertake reforms mirroring the approaches in other states.

• The Governments in Queensland, the Australian Capital Territory and Northern Territory did not announce formal plans, but did support the
Victorian Government in the High Court case.

2. Governments Are Now At A Crossroads, But There Is A Way Forward

As already mentioned, the High Court of Australia decision means Victoria (and potentially other states and territories) cannot levy a charge for each kilometre ZLEV motorists travel on their roads in the way they had planned – but the policy case for introducing an RUC for ZLEVs remains the clearest and most efficient pathway to road reform. The High Court did not criticise the policy, just who implements it, which begs the question; who will take it forward, and how?

The Federal Government, and its state and territory counterparts, must now agree on a process to ensure that every Australian pays their fair share for using our road network. Infrastructure Partnerships Australia is calling on both levels of government to develop a way forward that finishes the work Victoria and others started.

There are a range of options Australia’s governments could implement to progress this reform.

1. The Federal Government can empower states and territories to operate their own systems

The Federal Government could effectively shift responsibility to states and territories to fund, operate and maintain their own road transport networks. The Federal Government has done this before, with the abolition of a Commonwealth land tax in 1952 one example of when the government forfeited its right to raise revenue for the greater good of Australian taxpayers.

Under this approach, the Federal Government can set guidelines to ensure broad national consistency, but devolve its RUC power to states and territories, who would be free to design charging arrangements that work best for them. This means each jurisdiction’s system could be targeted to address emissions, congestion and other transport priorities and amended over time as priorities change. Each state and territory government would serve as a ‘one-stop shop’ for collecting motorists’ transport revenue and meeting their needs.

Obviously, this approach would need to be designed to ensure it complies with the Constitution and reflects limitations laid out in the High Court’s recent decision. This may be possible by allowing states and territories to put in place their own legislation to levy distance-based charges on all vehicles on their roads and drafted in a way that circumvents Constitutional limitations. The Federal Government may also decide to remove fuel excise when these arrangements come into place but this is not necessary to effectively devolve its RUC power to state and territories.

Alternatively, the Federal Government could put in place a national system for collecting road-related revenue, then redistribute funds dollar-for-dollar to each jurisdiction through reimbursement grants or another mechanism overseen by the Commonwealth Grants Commission.

3. The Next Leg Of The Road Reform Journey Should Take Us Further

There is no shortage of literature on the need for road reform

The case for road reform is well-established. Infrastructure Partnerships Australia’s policy proposal in 2019 drew from nearly three decades of policy advice on the need to change how Australians pay for road use.

We have been a loud and consistent advocate for reform, with a series of policy papers, submissions and advocacy campaigns over the course of our existence. Our work, alongside others, has highlighted the benefits of road pricing reform over two decades. See Figure 1 below.

Figure 1: Timeline of key documents arguing for road pricing reform

The form and detail of these arguments varies, but advocates for reform have been in wild agreement about a central premise: the more all-encompassing the road reform, the greater the benefits.

The proposed models have typically incorporated some element of time, distance and location-based charging to replace fuel excise, improve the fairness of road funding and reduce congestion.

4. Completing The Final Road Reform Steps

The final steps to completing road reform will see Australia’s management of its largest asset class by kilometres enter the twenty-first century. The reality is that future proofing our funding only ensures we have the capital to maintain our existing road bill. But this is only part of the problem.

Transport remains Australia’s second largest emitting sector, meanwhile every capital city is at the mercy of crippling congestion. The road to reform will be a long one, but an urgent one.