Australian Government Publishing Service, Melbourne

© Commonwealth of Australia 1994

ISBN 0 644 33300 6

Act 1968, no part may be reproduced by an process without prior written

permission from the Australia Government Publishing Service. Requests and

enquiries concerning reproduction and rights should be addressed to the

Manager, Commonwealth Information services, Australian Government

Publishing Service, GPO BOX 84, Canberra ACT 2601.

The Commission is grateful for the cooperation and assistance of the many participants in this inquiry.

The Commissioners also record their appreciation of the application and commitment of the staff

who assisted in the preparation of this report.

15 February 1994

The Honourable George Gear MP

Assistant Treasurer

Parliament House

CANBERRA ACT 2600

Dear Minister

submitting to you the report on Urban Transport in Australia.

Yours sincerely

Keith J Horton-Stephens Jeffrey Rae Derek Scrafton

Presiding Commissioner Commissioner Associate Commissioner

Level 28 Collins Tower

35 Collins Street, Melbourne 3000

Locked Bag 2, Collins East, Melbourne, VIC 3000

Telephone: 03 653 2100 Facsimile: 03 9653 2199

A1.1 Introduction 35

A1.2 Transport and objectives for Australian cities 35

A1.3 How are cities shaped? 37

A1.4 Concerns with current urban forms 42

A1.5 Choices and decisions 47

A1.6 Concluding remarks 52

A2.1 Why do we travel? 55

A2.2 Where do we travel? 57

A2.3 How do we travel? 59

A2.4 Patterns of road use in cities 63

A2.5 Trends over time in travel 65

A2.6 Conclusion 68

A3.1 Introduction 69

A3.2 Participants’ views 70

A3.3 Inadequate data 71

A3.4 The performance of urban public transport 72

A3.5 The performance of urban roads 87

A3.6 Conclusion 92

A4.1 Introduction 95

A4.2 The current role of government in urban transport 95

A4.3 The rationale for government involvement 99

A4.4 Choosing the appropriate role for governments 106

A4.5 The role of different levels of government 112

A5.1 Introduction 121

A5.2 Current institutional arrangements 121

A5.3 The shortcomings of present institutional arrangements 125

A5.4 Improving the institutional arrangements: corporatisation 127

A5.5 Conclusion and recommendations 133

A6.1 Introduction 135

A6.2 The role of regulation 136

A6.3 The effects of regulation 136

A6.4 The scope for competition 141

A6.5 Concerns about competition 146

A6.6 Competition in Australian public transport 151

A6.7 Conclusion 159

A7.1 The role of urban transport pricing 161

A7.2 Urban road pricing 163

A7.3 Urban public transport pricing 167

A7.4 The impact of transport price changes 175

A7.5 Current arrangements for urban transport investment 178

A7.6 Problems with the current approach to investment 180

A7.7 Reform of investment processes 187

A7.8 Alternative arrangements for financing investment 187

A8.1 Introduction 191

A8.2 Assistance to the transport disadvantaged 192

A8.3 The effectiveness of subsidies 197

A8.4 Transport for people with disabilities 207

A8.5 Longer-term reform 214

A8.6 Conclusion 215

A9.1 Introduction 217

A9.2 Congestion 218

A9.3 Better use of roads 221

A9.4 Conclusion 233

A10.1 Introduction 237

A10.2 The nature of the environmental problem 237

A10.3 Costs of pollution 243

A10.4 Developing policy responses to pollution 246

A10.5 Consideration of policy measures 248

A10.6 Technological change 259

A10.7 Road accidents 260

A10.8 Conclusion 266

A11.1 The Reform Package 267

A11.2 An Implementation Program 269

A11.3 Transport and cities: the package applied 275

A11.4 The impact of the reform package 286

A11.5 Locking in change 288

B 1.1 The role of urban rail in Australian cities 293

B 1.2 Institutional arrangements 295

B 1.3 Assessment of performance 296

B 1.4 Options for improving performance 306

B2.1 Characteristics of trams and light rail 321

B2.2 The current role of trams and light rail 323

B2.3 Assessment of performance of existing systems 325

B2.4 Options for improving performance 329

B2.5 Proposals for new light rail lines 331

B3.1 The role of buses 339

B3.2 Regulation and provision of Australian urban buses 342

B3.3 Performance of public and private bus operators

in Australia 344

B3.4 Issues in reform 354

B3.5 The Commission’s reform options 370

B3.6 Implementing reform 373

B3.7 Conclusion 380

B4.1 The role of taxis in urban transport 381

B4.2 Current institutional arrangements 382

B4.3 Rationale for regulation 386

B4.4 The effects of taxi regulation 390

B4.5 The benefits of opening up the taxi industry 395

B4.6 Issues in reform 401

B4.7 The Commission’s reform proposals 404

B4.8 Conclusion 406

B5.1 The role of community transport 409

B5.2 Impediments to community transport 414

B5.3 Recommendations 421

B6.1 The role of cycling 423

B6.2 The benefits and costs of cycling 425

B6.3 Expanding the role of cycling 429

B6.4 Conclusion 433

References 435

Figure AI. 1 Employment by sector 38

Figure A2.1 Reason for travel in Brisbane, 1976 and 1986 56

Figure A2.2 Journeys to work in Melbourne - 1985 58

Figure A2.3 Getting to work - the car or public transport 59

Figure A2.4 Travel patterns by modal share, 1985 60

Fiaure A2.5 Housing location and the journey to work, 1991 62

Figure A2.6 The cost of urban travel 63

Flaure A2.7 Urban road freight task - 1971 to 1991 65

Figure A2.8 Urban travel patterns, 1971-1991 66

Figure A2.9 Trends in motor vehicle ownership, 1961-1988 67

Figure A2.10 Car ownership in South Australia, 1911-1991 67

Figure A3.1 Farebox recovery of operating costs, government

public transport authorities 73

Figure A3.2 Passenger boardings per employee, government

urban public transport authorities 78

Figure A3.3 On time running for urban rail 85

Figure A7.1 Real fare index 170

Figure A8.1a Weekly expenditure on rail fares 197

Figure A8.1b Percentage of weekly income spent on rail fares 197

Figure A8.2a Weekly expenditure on bus and tram fares 198

Figure A8.2b Percentage of weekly income spent on bus and tram fares 198

Figure A8.3a Weekly expenditure on private motor cars 205

Figure A8.3b Percentage of weekly income spent on private motor cars 205

Figure A 10.1 Breaches of nitrogen dioxide standard in Sydney 241

Figure A10.2 Breaches of ozone standard in Sydney 241

Figure A10.3 Breaches of ozone standard in Melbourne 241

Figure AI 0.4 Breaches of ozone standard in Perth 241

Figure A10.5 Cost of road accidents reported to the police, 1991 263

Figure B1.1 Selected productivity measures for urban rail 300

Figure B4.1 Proportion of income spent on taxi fares 394

Figure B4.2 Taxi user income profile - Adelaide 1988 394

Figure B4.3 Taxi fares around Australia 396

Figure B4.4 Taxi licence values in Adelaide - 1974 to 1993 404

Table Al. 1 Summary of transport and land use in 32 cities, 1980 41

Table A2.1 Proportion of all travel by trip purpose, Melbourne 1992 56

Table A2.2 Estimated urban road travel 1991 64

Table A3.1 Urban public transport deficits 75

Table A3.2 Average urban public transport deficits per household 76

Table A3.3 Average urban public transport deficits per passenger 77

Table A3.4 Median travel time to work, 1971 and 1991 86

Table A3.5 Urban road expenditure 87

Table A3.6 Selected government levies on motorists, allocated to

urban travel 88

Table A5.1 Institutional arrangements applying to urban public

transport GTEs 122

Table A7.1 Public transport fare structures in Australian cities 169

Table A7.2 Marginal operating costs for peak and off-peak services, 173

Table A8.1 Transport disadvantaged groups 193

Table A8.2 Commuters in five income groups travelling to Melbourne’s

central zone by various transport modes 198

Table A9.1 Commercial vehicles on Sydney’s main roads 220

Table A9.2 Melbourne’s daily congestion costs 221

Table A9.3 State and Territory Government fuel franchise fees 226

Table A9.4 Tolls on Australian roads and bridges 228

Table A9.5 Current and planned electronic road pricing schemes 229

Table A9.6 Commuters driving into Melbourne’s central zone, by

zone of origin 232

Table A 10.1 Relative contribution to atmospheric pollution in major

Australian cities by source 238

Table A10.2 Carbon dioxide and carbon monoxide emissions by mode 240

Table A10.3 Costs of urban pollution and noise (1989-90) 245

Table A10.4 Capital, operating and external costs of transport

modes in Australian capital cities 246

Table A10.5 Urban road accidents, 1988 261

Table A10.6 Fatality rates for different modes of travel, Australia, 1988 261

Table A10.7 Summary of metropolitan road accident costs, Australia, 1988 263

Table A10.8 Accident costs in capital cities in 1991 264

Table B1. 1 Main characteristics of Australia’s urban heavy rail systems 1991-92 294

Table B1.2 Recovery of operating costs from fares: Australian urban rail 299

Table B1.3 Australian urban rail investment 1990-91 to 1992-93 305

Table B2.1 Summary of operating characteristics of trams, light rail and trains in Melbourne 322

Table B2.2 Overview of the Melbourne and Adelaide tram systems 323

Table B2.3 Productivity of the Melbourne and Adelaide tram systems 328

Table B3.1 Total kilometres travelled on urban route bus services,

year ended 30 September 1991 339

Table B3.2 Australian public bus operations, selected statistics,

30 June 1993 340

Table B3.3 Australia’s urban bus industry 341

Table B3.4 Regulatory arrangements for Australia’s private urban

buses 343

Table B3.5 Award comparison between STA (SA) and a private

operator in South Australia 349

Table B3.6 Some financial indicators for private and public bus

operators in Australia 350

Table B3.7 Public and private bus operations in Australia 351

Table B3. 8 Labour productivity ratios in New Zealand and Australia 351

Table B3.9 Total staff per million bus kms in the United Kingdom 352

Table B3. 10 Comparison of private operators with their own state

public operator 353

Table B3.11. Cost savings from tendering bus services in other countries 363

Table B4.1 Taxi licence values in December 1993 391

Table B5.1 Examples of community transport providers 412

Table B6.1 Energy consumption by mode of transport 425

Box A1.1 The evolution of transport and urban settlement in

Melbourne 40

Box A1.2 The Toronto experience 46

Box A1.3 Planning for self-sufficiency 50

Box A1.4 Transport infrastructure and urban development 51

Box A2.1 A snapshot of urban transport in Australia 61

Box A4.1 The present roles of Australian governments in urban

transport 96

Box A4.2 State and territory governments objectives in urban transport 97

Box A4.3 User costs and service coordination 102

Box A4.4 Coordinating public transport in other countries 109

Box A5.1 State and Territory Government agencies responsible

for urban roads 124

Box A5.2 Institutional changes in Australia’s urban public transport

GTEs to date 126

Box A5.3 Examples of performance indicators for public

transport authorities 131

Box A6.1 The impact of economic regulation 137

Box A6.2 Costs of service - rail and buses 140

Box A7.1 Is there a road user deficit? 166

Box A7.2 How investment decisions are made: Sydney’s M2

Motorway 183

Box A7.3 How investment decisions are made: Perth’s northern

suburbs transport corridor 186

Box A8.1 The costs of meeting social objectives 196

Box A8.2 What price mobility? 213

Box A10.1 Evaluating environmental costs and benefits 244

Box B 1.1 Perceptions of urban rail services 304

Box B3.1 Deregulation in the UK - different experiences 356

Box B3.2 New Zealand’s reform experience 358

Box B3.3 Bus franchises in Nordic countries (Part 1) 360

Box B3.4 Bus franchises in Nordic countries (Part 2) 361

Box B3.5 Competitive tendering in London 364

Box B3.6 The urban bus reform timetable 377

Box B4.1 How to get a hire car licence 386

Box B4.2 Reform of the New Zealand taxi industry 397

Box B4.3 Changes to the United States taxi industry 399

Box B4.4 The benefits of reform for the transport disadvantaged 407

Box B5.1 Meeting local transport needs: Happy Valley Council 411

Box B5.2 The side effects of regulation: The case of Pakenham. 415

Box B5.3 Home and Community Car (HACC) funding arrangements 419

Box B6.1 Participants views 431

AAA Australian Automobile Association

ABS Australian Bureau of Statistics

ACTION Australian Capital Territory Internal Omnibus Network

ALGA Australian Local Government Association

ARF Australian Road Federation

ARRB Australian Road Research Board

ATIA Australian Taxi Industry Association

BTCE Bureau of Transport and Communications Economics

CBD Central Business District

CGC Commonwealth Grants Commission

CPI Consumer Price Index

CPL Cents Per Litre

CSIRO Commonwealth Scientific and Industrial Research Organisation

CSO Community Service Obligation

CTC Consumers Transport Council

CUTS Coalition for Urban Transport Sanity

ENP Electronic Number Plates

ERP Electronic Road Pricing

ESD Ecologically Sustainable Development

ETC Electronic Toll Collection

GTE Government Trading Enterprise

HACC Home And Community Care

IVU In-Vehicle-Unit

LCV Light Commercial Vehicles

LRT Light Rail Transit

WTFP Multilateral Total Factor Productivity

MTT Metropolitan Transport Trust

MULTI Model of Urban Land use and Transport Interaction

NHS National Housing Strategy

NRMA National Road and Motorists’ Association

NRTC National Road Transport Commission

PPK Per Passenger Kilometre

PSA Prices Surveillance Authority

PTC Public Transport Corporation (Victoria)

PTU Public Transport Union

PTUA Public Transport Users Association

RACV Royal Automobile Club of Victoria

RDO Rostered Day Off

RTA Roads and Traffic Authority, New South Wales

SEPTS South East (Queensland) Passenger Transport Study

SRA State Rail Authority (New South Wales)

STA New South Wales State Transit Authority

State Transport Authority of South Australia

TFP Total Factor Productivity

TPC Trade Practices Commission

TWU Transport Workers Union

Vicroads Roads Corporation of Victoria

A fee paid by an operator of transport services for the use of

infrastructure

An arrangement wherein a private firm builds, owns and operates

infrastructure for a period of time and subsequently transfers the

facility to government

A road provided for priority bus travel only

A community service obligation arises when a government requires

a public enterprise to carry out activities (relating to outputs and

inputs) which it would not elect to do so on a commercial basis or

which it would only do commercially at higher prices

Transport services provided by local and/or voluntary organisations

to meet specialised local transport needs Impediments on the use of a

fixed resource or one with a capacity constraint (at least in the short

run), imposed on users by the activity of other users

The degree of ease with which firms can enter or leave a market. In a

contestable market the threat of new entrants causes the incumbent

firms to operate at levels approaching that expected in an

competitive market

Road tools which cover all entry and exit points to a designated area

such as the CBD

The least cost approach of achieving a particular Goal

Factors which cause the average cost of producing a commodity or

service to fall as the firm produces more of it, for example, a firm

enjoying economies of scale would less than double its costs if it

doubled its output

Access fee (or charge)

Build-own-operatetransfer

Busway

Community Service

Obligation

Community transport

Contestability

Cordon toll

Cost-effective

Economies of scale

The percentage by which the quantity of a good demanded

decreases in response to a one per cent increase in the price paid for

the good while holding all other factors constant

The use of electronic technology to automatically identify and

charge individual vehicles for use of particular parts of the road

system

Lanes designated for use by particular types of vehicles. (See high

occupancy vehicle (HOV) lanes)

The right to be the sole operator of urban transport services in a

designated area for a specific period of time

The impact of activities that confer costs or benefits on a third

party. These effects may arise during production or consumption

phases of an activity and may be of an environmental, social or

financial nature

The revenue a public transport operator collects from fares only

A publicly owned entity trading in a defined market, for example, a

rail or bus authority

Lanes designated for use by vehicles, including buses, carrying

more than a certain number (usually two or three) of passengers.

Sometimes called express or transit lanes

A modem tram system incorporating modem technology capable of

on-street running, but segregated from road traffic as much as

possible

Occurs when economies make it possible for one firm to supply the

entire market more cheaply than a number of firms

A bus system which is guided along a fixed track for part of its

journey

A measure of productivity, expressing one or more outputs relative

to one particular input

Elasticity of demand

Electronic Road Pricing

Express lanes

Exclusive franchise

Externalities

Farebox revenue

Government Trading

Enterprise

High occupancy vehicle

lanes

Light rail Transit

Natural monopoly

O-Bahn

Partial factor productivity

Quantitative and qualitative measures used to assist in determining

how successfully objectives are being achieved. They may be

measures of, say, workload, efficiency or effectiveness

Charges made for the use of particular roads

The part of capital expenditure which is unrecoverable, due to

limited alternative uses, if an enterprise is insolvent such as

permanent ways in urban transport

An organisation or a system using its available resources in an

optimal manner to maximise outputs

A measure of productivity, expressing total output relative to all

inputs used

See high occupancy vehicle (HOV) lanes

Performance indicators

Road tolls

Sunk costs

Technical efficiency

Total factor productivity

Transit lanes

* The Treasurer extended the reporting date to 15 February 1994.

I, JOHN SYDNEY DAWKINS, under Section 7 of the Industry Commission Act 1989 hereby:

1. refer urban transport to the Industry Commission for inquiry and report within fifteen months of

receiving of this reference;

2. specify that the Commission is to report on institutional, regulatory and other arrangements

affecting transport operations in Australia’s major metropolitan areas and larger cities and towns

which lead to inefficient resource use;

3. request that the Commission give priority to areas where greatest efficiency gains are in prospect

and early action by Governments is practicable, and advise on potential implementation strategies

and responsible agencies;

4. without limiting the scope of the reference specify that the Commission is to report

on:

(a) the provision, pricing and subsidisation of, and access to, urban transport p services, including

rail;

(b) the extent to which current patterns of, and policies on, urban settlement in Australia may

affect the efficient use of urban transport and the role of transport infrastructure in shaping the

nature and pace of urban development;

(c) the impact of Commonwealth, State, Territory and Local Government taxation and funding

policies on the development of urban transport systems and traveller behaviour;

(d) work practices inhibiting the efficient provision of existing or alternative transport services;

(e) the gains to be achieved from adopting international best practice in the provision of urban

transport infrastructure and services;

(f) factors adversely affecting private sector investment in urban transport

(g) the nature and scale of the external benefits urban areas and the implications for pricing

policies and for assessing the performance of service providers; u an

(h) ways of achieving improved efficiency and integration within Australia’s urban transport

systems including private vehicle usage; and

(i) the social, environmental and economy-wide implications of current, and proposed changes to,

urban transport services;

5. specify that the Commission is to have regard to the economic, social and environmental objectives

that Governments identify for their urban transport policies; and

6. specify that the Commission is to take account of recent substantive studies.

John Dawkins

18 September 1992

Cities give their residents access to a wide range of economic, social

and cultural activities. To enjoy them, people have to be able to move

around the city or to have goods and services brought to them. For

most people, urban travel and transport are costs to be minimised,

rather than things to be enjoyed in their own right. Fast, efficient,

reliable and safe urban transport systems are therefore vital.

Urban transport shapes urban land use. A good illustration of this was

the rapid development of Melbourne during the 1880s on the heels of

its expanding railway system. Land use, in turn, influences the nature

and viability of urban transport systems. This may be seen in the

historical evolution of most of the urban transport systems in

Australia’s cities where their extension and upgrading has followed

increases in urbanisation. Because of the strong and reciprocal

relationships between land use and transport in Australian cities, State

and Territory governments have sought to integrate heir strategic land

use and transport planning.

In Australia, the urban transport systems consist of the road network,

together with the private car and other motor vehicles that use them,

the various scheduled public transport modes (for example, buses, rail,

trams and ferries), taxis and, of course, paths for cycling and walking.

While trains and trams run on their own tracks, buses and taxis share

the road network with the private car, bicycles, freight trucks, delivery

and service vehicles. The road network is entwined with the networks

of bicycle paths, footpaths and walking tracks.

Cars and other private motor vehicles are used for nearly 90 per cent of

in Australian cities. Their use reflects preferences from a range of

suburban lifestyles, as well as the increasingly complex, cross city

travel which suburban living entails. This complexity is a function of

many factors, but among the more significant are the growth in the

proportion of two-income households and the shift of employment and

retail activity to the suburbs. On the other hand, the use of the motor

car, notably in the peak hour, is associated with a range of adverse

environmental and social impacts which are of increasing and

justifiable concern to the community.

Scheduled public transport is responsible for about ten per cent of all

urban trips in Australia. It is better suited to journeys to or from city

centres and the larger sub-centres, especially along the more densely

populated and patronised corridors in the peak hour. These largely

radial trips are dominated by the daily task of moving large numbers of

children to school and city workers to and from their places of work.

The importance of this task underlines the key role public transport

plays in the life of our cities. Without it, Australia’s larger cities would

simply grind to a halt and the environmental amenity of all of our cities

would suffer. Public transport also contributes to a more just society by

providing essential mobility to many disadvantaged people who do not

have or cannot use a motor car.

In devising ways to handle the adverse social and environmental

impacts of urban travel and the motor car, Australians do not need to

deny themselves the substantial benefits they provide. The more

sensible approach is to ensure that every individual pays all the costs

that his or her travel imposes on the community, while adequately

protecting the disadvantaged. These costs are not confined to the costs

of building and maintaining the transport infrastructure and operating

the transport services which use it. They also include the economic

costs of road accidents, the impacts on the environment and the other

consequences of urban travel which are not reflected in the fares or

user charges imposed on travellers.

At the same time Australians need to take care not to lessen the

efficiency of moving goods around and accessing services within our

cities. Although the issues of urban freight and commercial

distribution were not examined in depth in this inquiry, their

contribution to business activity and employment in our cities is well

recognised. All this underlines the value of having urban transport

systems which are efficient, adaptable and responsive. Such attributes

are essential to the quality of life for those who live in cities. They are

also crucial to the international competitiveness of Australia’s trade

and commerce, and hence to its economic well being.

The Commission’s analysis of the performance of Australia’s urban

transport systems reveals much with which to be satisfied. Each day

these systems move large numbers of people and goods around

Australian cities in safety, in relative comfort and with a high degree

of certainty. Virtually all individuals and businesses are able to fulfil

all of their basic travel requirements and most do a lot better than that.

This analysis also points to a number of areas where there is scope to

improve the performance of urban transport in Australia.

Urban transport systems generally lack the to cope with changing

travel patterns and with social and technological changes. With the

exception of the traffic code and other public safety regulation, the use

of private motor vehicles (cars, trucks, delivery vehicles, etc) is

unconstrained by government regulation.

In contrast, virtually every aspect of public transport is regulated by

government. Regulation governs who will provide the services, the

routes on which the services will run, the type and size of vehicle to be

used, the frequency and timing of the services and the fares to be

charged. This regulatory web may well protect individual operators

but is at the expense of public transport’s collective ability to meet its

greatest competition, the private motor car.

Service delivery in public transport is often inefficient and short on

innovation. There is little direct competition in public transport due

to the practice of granting what are effectively monopoly rights

over particular routes in perpetuity. Regulation has accelerated the

loss of public transport’s share of the urban travel market to the private car.

Substantial efficiencies can be made by opening up the rights to

provide public transport to competition from other operators, who

can also offer more effective competition with the private motor

car. Such savings have been made in many countries, including

Canada, Denmark, New Zealand, Sweden, the United Kingdom.

and the United States. Similar policy changes are under

consideration in a number of other countries, for example Germany and Switzerland.

In Australia, State and Territory Governments have begun to open

up their public transport to greater competition and are starting to

see the benefits in lower operating costs.

The performance of government transport agencies in the delivery

of public transport services compares unfavourably with

international best practice and there is scope for greater efficiency

in the provision and management of transport infrastructure.

While the data are generally poor, the available evidence suggests

improvement in many areas. Users complain that public transport

services are to often unreliable, infrequent, uncomfortable and

insecure. Where service is poor or non-existent, regulation often

impedes taxis or community transport from filling the gaps. For

example. a community mini-bus service in Pakenharn (on the

south-eastern fringe of Melbourne) is prevented from advertising

or charging fares even though there is no local bus service.

disadvantaged in the community are not well targeted. The substantial

subsidies to public transport do not always help the transport

disadvantaged as many of the beneficiaries are the better-off members

of the community. Moreover, most people with disabilities cannot use

scheduled public transport and therefore do not benefit from this

assistance.

of local air quality, noise and risks to life and limb, with motor

vehicles the largest contributor. There have been significant reductions

in some emissions, for instance carbon monoxide and ozone in Sydney

and Melbourne. In other cases, the situation appears to have

deteriorated (for example, ozone in Perth) or to be unchanged (for

example, oxides of nitrogen). At present, the main air quality

problems are in Sydney and Melbourne but as other cities grow, they

also could encounter similar problems, particularly as road congestion

builds up.

Fares and uses charges do not reflect the economic costs of provision

to the individual. Although motorists make significant financial

contributions by way of taxes, fees and charges, they do not pay for

their actual use of urban roads. Accordingly, road congestion in

Sydney and Melbourne is estimated to cost the economy some $4

billion a year and this falls disproportionately on trade and commerce.

Fare schedules for public transport are largely invariant with distance

and time of travel, and so do not reflect the costs of service provision,

even ignoring the costs of constructing the track.

building and operating urban transport systems are both high. Each

year, the public sector spends over $2 billion building and maintaining

urban roads and up to $3 billion subsidising public transport services.

Together, these amount to more than $900 a year for each household

in Australia. While governments levy a range of taxes, fees and

charges on drivers, their vehicles and the fuel they use, the revenue

obtained (over $9 billion) is unrelated to public expenditure on

transport, let alone urban transport.

The obverse of these problems is the substantial benefits that would

flow from fixing. them. Box 1 outlines the broad nature and level of the

benefits that can be captured by transforming Australia’s urban

transport systems into the efficient, dynamic and innovative systems

which our cities and our economy require.

• The reduction in traffic congestion as a result of road pricing will lower travel times and local air

pollution.

• The savings from reducing road congestion, which costs up to $4 billion a year in Sydney and

Melbourne alone, will especially benefit business activity and international competitiveness.

• Improved management of urban transport infrastructure will bring savings to taxpayers in the costs

of building and maintenance.

• Better quality and a wider range of services will be available to public transport users, especially in

those area which are poorly serviced at present.

• The transport disadvantaged, especially people with disabilities, will enjoy better access to public

transport.

• There will be savings in the cost of operating public transport, for example, for buses about $250

million a year (or 40 cents per passenger journey).

• Taxi fares will fall by up to $2 a trip on average, saving users some $300 million a year.

• Land use and transport planning will be assisted by fares and user charges which better reflect the

economic costs of all urban transport modes.

Australia’s urban transport systems are largely creatures of its

governments. Between them, the three levels of government play

many roles which affect the performance of our urban transport

systems. In particular, they:

• plan and regulate land use;

• plan the urban transport infrastructure;

• build and manage the transport infrastructure;

• regulate the operators of public transport services;

• operate most of the scheduled public transport services;

• coordinate public transport services within the

• larger urban areas; and

• take steps to make transport more accessible to the disadvantaged.

The Commission found flaws in the manner of the execution of some

of these roles, even where there is a sound reason for government to

be involved. The correction of these flaws lies in governments more

clearly specifying their policy aims and adopting more efficient ways

to achieve them. The following principles should underlie the

selection of specific solutions.

First governments need to integrate effectively the planning of land

use with the planning of transport infrastructure in Australian cities.

The planning decisions need to be supported by the application of

appropriate land use regulation.

Second, opening up the provision of both public transport services and

transport infrastructure to new players is essential to greater efficiency

and innovation in their delivery, Government can achieve its social,

environmental and public service policy objectives without itself being

the operator or coordinator of public transport services in a city, or the

provider of its transport infrastructure.

Third, fares and charges for the use of urban transport infrastructure

and services should reflect all the economic costs imposed by

individual use, including the costs imposed on third parties and

impacts on the environment, accidents, and congestion.

Fourth, each of the roles of government should be separated and

preferably conducted by a specialised agency. This facilitates setting

clear objectives for agencies, selecting the most appropriate means

for attaining them and establishing clearer lines of accountability for

agency performance.

Fifth, as far as possible, decisions on the development and

management of public transport services and transport infrastructure

should be made by those closest to the market.

Finally, the public sector’s role in planning and funding urban

transport systems is best conducted at the lowest level of government

which is practicable. It would be impractical to make local

government, as presently constituted, responsible for planning an

entire transport network, particularly in the larger cities.

Nevertheless, local government does have an important role to play in

planning land use, transport infrastructure and public transport

services.

In the last few years, governments in Australia have made progress in

implementing many of the above principles. Progress has been most

striking in New South Wales and Victoria. Plans to implement policy

changes are well advanced in Queensland, South Australia and

Western Australia.

But the progress has not been as rapid as in other areas of transport in

Australia, such as long distance road transport and domestic aviation,

and in other sectors such as finance and telecommunications. Much 8

remains to be done to bring urban transport up to the standards the

community is looking for.

There is no ’quick fix’ to the problems facing urban transport, in

large measure because of the complexities of modem urban transport

systems. As a result, many of the Commission’s recommendations

are interdependent but most can be progressed in isolation from

others. Although coordinated implementation offers enhanced

benefits, a constraint on change in one area should not delay action

in another.

Whilst presented as a package. some recommendations are clearly

more pressing than others. The greatest emphasis should be on

reforming the environment within which services and infrastructure

are delivered. On this basis, reform should seek to:

• introduce constructive competition in public transport services;

• reform the agencies involved in transport infrastructure and public

transport;

• price urban transport so as to encourage the more efficient use of

both roads and urban public transport;

• promote better environmental outcomes associated with urban

travel;

accessible to the disadvantaged; and

• promote better decisions on investments in transport systems.

The need for competition in the delivery of urban public transport

services is most pressing. Services should be opened to greater

competition both within and between transport modes. Every

operator, whether publicly or privately owned, should be subject to

regular competition. This is the most effective way of securing the

lowest possible operating costs and the service improvements that

people value most.

The introduction of greater competition in the delivery public

transport services should not be at the expense of either passenger

safety, coordinated services or system-wide ticketing in public

public transport vehicles and their operators, do not need to be

Where the benefits justify it, governments need to take steps to

provided in scheduled public transport. There are a variety for

governments to so. They range from requiring the operators

undertake these functions collectively (as happens in some other

The former has the advantage of having these tasks undertaken by

those who have the most to gain from doing it right and the most to

lose if they do not.

Individual approaches are needed to introduce competition for the

different modes that take into account the characteristics and

circumstances of each.

tendering of a series of service franchises for each city. The

franchises would be automatically re-tendered when they end. Once

experience has been gained with franchising, a case by-case

consideration should be given to whether unrestricted access to any

service area would be beneficial. This consideration would be aided

by conducting demonstration projects of open access to selected

service areas for specific periods.

The areas covered by government-owned bus operators should be

divided into a series of service areas, where appropriate, and the

service areas progressively franchised. While the government owned

operators should be free to bid for the franchises, they should first be

divided into commercially autonomous units, say, on a depot by

depot basis.

This division should be done as early as possible in the franchising

process so that the government operators are given a reasonable time

to make the efficiency improvements necessary for them to compete

with the private sector for the franchises of their former service areas.

Railway infrastructure and services should be separated into

commercially autonomous business units. Where appropriate, urban

rail networks should be divided into geographically-based business

units. Looking ahead, State Governments should be open to other

options, including the creation of separate infrastructure authorities

and the franchising of rail services. Seeking expressions of interest

from potential operators could be a way of generating information

about the costs and benefits of these options.

State and Territory Governments should progressively eliminate all

selling new licences each year by public tender, with financial

compensation to existing licence holders if necessary. Taxi fares

should be deregulated, but taxis operators required to notify the

maximum fares (and any changes to them) to government.

Community transport operators should not be restricted to providing

feeder services to other transport operators or to servicing those with

special needs.

With the liberalisation of access, some transport operators will face

opportunities to compete for the larger urban travel market which will

have been created by reform.

enhance the achievement of the many public objectives of urban

transport policy. This implies dividing responsibility for delivery of

public transport services from other aspects of government

administration in urban transport, including economic and safety

regulation, and the administration of service franchises.

Efficiency would be enhanced if government-owned public

transport operators were, as far as possible, subject to the same

incentives and disciplines as privately owned ones. This can be

achieved by giving the government operators clear commercial

objectives, making them fully accountable for their overall

performance but allowing them autonomy in the conduct of their

day-to-day operations.

State and Territory road agencies should be predominantly

responsible for planning and managing the road infrastructure.

Where these agencies or local government maintain a capacity to

build or maintain road works themselves, the allocation of such

work should be the subject of open, competitive tender.

The key to reforming pricing in urban transport involves

progressively aligning fares and user charges with the economic

costs of individual use of urban transport infrastructure and

services.

are large efficiency gains from pricing the actual use of roads.

Ideally, user charges should be tailored to the costs associated with

individual use, including pavement damage, congestion, road

accidents and any environmental damage. Since most urban freight

is moved by road, a rational system of road pricing should benefit

trade and commerce, and hence the community.

Electronic technologies to price road space are technically feasible

and able to protect the privacy of the individual motorist. The

Commission favours their progressive introduction. Moves to do so

could commence with the introduction of tolls on certain new or

upgraded urban arterial roads, bridges and tunnels to reduce

congestion. Wherever practicable, tolls should be progressively

extended and differentiated by time of travel, so. as to control access

to congested urban areas, and converted to electronic collection.

Community acceptance of road user charging would be enhanced

were the total revenue collected from motorists not to increase.

Rather the objective should be to shift more of the revenue burden

towards those users who impose the greatest economic costs on the

community.

Whether direct road pricing is implemented or not (or in the interim

until it is), a package of restrictions, and taxes on car parking,

differentiated franchise fees on fuel, and traffic regulation offers a

practical, second best solution to the issues of traffic management

and congestion. Such a package is best implemented on an

area-wide basis. In the case of fuel franchise fees, the Commission

recommends that State governments consider introducing a

differential on fuel sold in the major urban regions compared with

the rest of the State. While subsidisation of public transport is

inefficient in reducing road congestion on its own, measures to

promote a more efficient use of roads will improve the appeal of

public transport and reduce the adverse environmental impacts from

urban transport.

Public transport fare schedules should be restructured both to create

a greater differential between peak and off-peak fares and to increase

with the distance travelled. Improvements in the quality of services

and reductions in operating costs are essential throughout the

country and should accompany, if not precede, any fare

restructuring. General fare increases, which may result from fare

restructuring and moves to lift cost recovery, would best be phased

in over several years. The approaches recommended on charging for

actual road use will also help to counter the continuing loss of

patronage from public transport.

Responsibility for meeting social justice and equity objectives

should remain with government and not be devolved to their public

transport agencies. If governments require variations from what a

public transport operator judges to be commercially justified, they

should be handled through a formal community service obligation

(CSO) contract with the appropriate operator which specifies the

nature of the CSO to be provided and the level of government

funding to be paid in exchange for it.

A similar approach should be adopted to address any adverse equity

or social consequences associated with road user charging. On

equity grounds, concessional road user charges should be given to

the transport disadvantaged in much the same way as they are for

public transport.

Both private and public transport have the scope to reduce the

environmental impacts associated with urban travel. In the case of

public transport, the scope to do so is considerable.

There is a lack of comprehensive data on the level of vehicular

emissions associated with urban transport and their impact on air

quality in Australian cities. Accordingly their economic costs are

unclear and more work remains to be done on them.

In the meantime, governments will have to make difficult

judgements about the likely extent of these economic costs. This

uncertainty underlines the importance of appropriate caution in

designing and implementing measures to ameliorate the adverse

environmental impact of urban transport. Otherwise they may

impose costs greater than the expected value of any reductions

which they achieve.

Emission standards for new motor vehicles are playing a role in

ameliorating air pollution in Australian cities and should continue to

do so. The control of these emissions will increasingly take effect as

older cars are replaced by newer, cleaner vehicles. A system of

emission testing of motor vehicles, with penalties for ’dirty’ vehicles,

should be introduced in the larger cities with the most severe air

quality problems. The emission standards for such tests should vary

with the age and type of vehicle.

Reforms in other areas will indirectly enhance environmental

quality. Higher priority to pedestrians and cyclists in transport

planning will help. Road user charges will promote car pooling, help

to reduce unnecessary travel and encourage more travel by public

transport.

As a matter of social justice, the community requires the provision of

assistance to those who are judged to be disadvantaged in their

access to transport services. The incremental costs of this assistance

should be funded directly by taxpayers from general revenue, rather

than from other transport users. This will help governments in

setting the priorities for such community service obligations and in

ensuring that they are being met efficiently.

Assistance to the transport disadvantaged has traditionally taken the

form of non-commercial services and fare concessions provided by

public transport and is often confined to particular operators. In

selecting the means of providing assistance to the transport

disadvantaged, governments should recognise the existence of

alternatives to both the traditional operators and to conventional

public transport.

People who are disadvantaged, especially those with disabilities,

would be major beneficiaries from the Commission’s

recommendations. Among the more important changes for them are

the taxi reforms and the greater scope for the development of

community and scheduled public transport services that should flow

from reduced regulation in these areas. On the other hand, there

may be specific inequities associated with individual

recommendations (for example, the introduction of road pricing). In

such cases, governments should introduce specific remedies (for

example, concessional road user charges).

Major investments by government authorities in urban transport

services or infrastructure (including roads) should be subject to

prior economic evaluation with a full assessment of the

environmental impacts. Evaluations should examine all feasible

alternatives to the investment project, including other transport

modes such as bicycles and traffic management options. The

evaluations should be made public.

Value capture and contributions from non-users who benefit from

urban transport, can be useful to help fund urban transport

infrastructure. To realise its potential benefits, value capture has to

be negotiated.

In its terms of reference, the Commission was asked to report on

implementation strategies for introducing policy reform.

Decisions about the pace and sequence of reform need to. recognise

the practicalities involved. As far as possible, the approach should

be to minimise the costs of transition, while maintaining a degree of

stability. Considerations of equity and social justice reinforce the

need for phased, rather than immediate, change. These

considerations also demand that, as far as possible, the community

ameliorate any adverse consequences of change on the those who

are disadvantaged.

These practicalities should not overshadow the urgency of

commencing the process of reform. The extent of the benefits and

the unsustainability of the existing arrangements all point to the need

to start the process without delay. The indicative timing proposed by

the Commission is neither precise nor rigid, but should be

interpreted as guidance on the broad order in which the changes

recommended might best be tackled.

Most pressing is the introduction of competition in the rights to

provide public transport services. This should begin by commencing

processes to tender increasing numbers of taxi licences and franchise

service areas for buses. It should be extended subsequently to the

provision of tram and train services as opportunities to do so arise.

The existing government-owned public transport operators should be

divided into autonomous units and corporatised as soon as possible.

Functions associated with the administration and regulation of urban

transport should be assigned to other agencies of the government.

The operators should be given a reasonable time to make operating

efficiencies before franchises for all their service areas have been put

out to tender.

As and where this is considered to be necessary, governments should

take steps to ensure that machinery is put in place to coordinate

services among individual public transport operators and to provide

system-wide ticketing.

The changes recommended would help to move people, goods and

services around Australia’s cities more cheaply, reliably and in

safety.

MAIN FINDINGS AND

RECOMMENDATIONS

• The Commission's analysis highlights the significance of transport for the life and efficient working of Australia's cities:

- transport gives people access to a wide range of economic, social and cultural activities;

- the different modes of transport allow people to choose how they go to work, school, shops and so on;

- technological change and other improvements to transport have increased the opportunities and choices that are available;

- although private cars dominate urban travel, public transport, cycling, walking, taxis and community transport have significant roles; and

- efficient urban freight movements are essential for trade and commerce.

• The Commission finds the main problems with Australia's urban transport systems are that:

- the cost to taxpayers of urban public transport is high;

- road congestion is a growing problem in the larger cities;

- the delivery of public transport services and road infrastructure is often inefficient;

- the quality of public transport is often poor, particularly in terms of reliability and

frequency. Criticisms from participants also included unattractiveness, lack of safety, and inconvenience;

- while some steps have been taken to improve management and work practices, public transport agencies have a considerable way to go to achieve best practice and there is

room for improvement in the performance of road agencies;

- urban transport has major environmental impacts, especially on local air quality, noise and risks to life and limb; and

- measures to improve accessibility to urban transport by the disadvantaged in the

community are not well targeted.

• Urban transport services should be determined by what people need rather than what transport agencies decide to provide.

• The need to inject competition between service providers is a high priority. It will allow the

most efficient mix of transport services to develop in response to changing travel demands -

securing service improvements, innovation and lower costs. Regulatory and subsidy

arrangements should ensure that every operator, both public and private, is subject to

competition or the threat of competition.

• Until full competition is achieved, any preference given to particular modes should be publicly disclosed.

• The introduction of greater competition in the delivery of public transport services should not

be at the expense of passenger safety, nor of the effective coordination of services.

• The fundamental ingredient to improving the performance of the Australian urban bus industry is to open it up to competition or the threat of competition.

• State and Territory Governments should (continue to) introduce progressively a system of exclusive franchises to operate bus services in urban areas. Such franchises should be:

- up to seven years in duration, allocated via open public tender and automatically retendered at the end of their term;

- open to all prospective operators without restriction with no preference for any franchisee at renewal time; and

- awarded under a tender evaluation process in which any underlying weighting of individual service variables is transparent.

• Competition needs to be extended to all urban bus service markets as

existing agreements expire.

MAIN FINDINGS AND

RECOMMENDATIONS

• Each government owned bus operator should be separated into commercially autonomous

units, say, on a depot by depot basis.

• After the initial experience with exclusive franchising has been evaluated, consideration should

be given to the introduction of open access to all bus services by any operator.

- separation of urban passenger services from other rail traffic;

- separation of urban passenger operations into geographically-based units;

- separation of services from infrastructure; and

- franchising rail services.

As a minimum, rail infrastructure and different types of rail traffic should be operated by

commercially autonomous business units. Where appropriate, existing urban rail networks

should be divided into geographically-based business units.

Looking ahead, State Governments should be open to other options for reforming urban rail

in ways that promote greater efficiency, including the creation of a separate infrastructure

authority, and the franchising of rail services. Seeking expressions of interest from potential

operators could be a way of generating information about the benefits and costs of pursuing

these options.

• Major benefits would accrue from introducing open entry into the taxi industry over a

number of years, while retaining all aspects of public safety regulation. State and Territory

Governments should sell new licences by public tender every twelve months. Two variations

are suggested: the first involves distribution of the sale proceeds in equal shares to existing

licence holders; the second does not provide such financial compensation but has fewer new

licences released each year. Under either variation, taxi fares should be deregulated

immediately.

• If State and Territory Governments are unwilling to adopt the above recommendation at this

time, they should consider three other options:

- separating the taxi rank and phone booking segments of the market;

- tying taxi licence numbers to performance requirements; and

- capping the present value of taxi licences.

• Care should be taken not to lessen the efficiency of freight movements in the development

of any policies affecting urban transport. Since most urban freight is moved by road, more

rational road pricing and investment should benefit trade and commerce and hence the wider

community.

• An incremental approach should be adopted to the introduction of area wide electronic road

pricing. This would start in Sydney and Melbourne with tolls (preferably electronic) on

certain new or upgraded urban arterial roads, bridges and tunnels, so as to reduce congestion

and to familiarise the public with electronic collection. In addition, wherever practicable ,

tolls should be extended to existing arterial roads, and differentiated by time of travel, so as

to create controlled access to congested areas.

• The tolls and other such charges should not be used to raise additional revenue from motorists

in total, but rather shift the burden towards those who impose the greatest costs. A policy of

revenue neutrality should be adopted, by offsetting the costs of user charges with equivalent

reductions in either the Commonwealth fuel excise or State franchise fees on fuel. The

Commission recognises that this policy will have adverse impacts on some of the transport

disadvantaged and recommends the introduction of appropriate concessional arrangements.

• If electronic road pricing is not implemented (or in the interim until it is), parking

restrictions and taxes offer some practical solutions to congestion control. They should be

part of any sensible demand management strategy and are best implemented on a city-wide

basis. State Governments should also consider differentiating their fuel franchise fees

between the major urban areas and the rest of the state.

• Subsidisation of public transport is an inefficient way of reducing road congestion

MAIN FINDINGS AND

RECOMMENDATIONS

• There should be a thorough review of third party insurance arrangements and their role in

making the full costs of accidents part of the internalised costs of road users.

autonomous business units within corporatised transport agencies.

- State and Territory transport licensing arrangements should not be used to restrict its

provision and development;

- services should not be restricted to people with special needs or to feeder services;

- where there are no existing bus or rail services, community transport operators should

be allowed to establish new services and to charge fares; and

- greater cooperation between local councils, welfare groups and bus and taxi operators

should be encouraged, for example, through the appointment of a community

transport officer or broker.

The efficiency of transport agencies would be enhanced if, as far as possible consistent with

their functions, they were exposed to the same incentives, rules and regulations as private

enterprise. This can be achieved through the process of corporatisation.

• The following initiatives be implemented for all urban transport Government Trading

Enterprises without delay:

- they be constituted as statutory corporations, which are separate from the

departmental structure of government;

- regulatory functions be removed from their responsibility;

- board members be appointed on the basis of individual experience, knowledge and

skill, and not as representatives of interest groups;

- boards be accountable to the parliament through the relevant minister(s);

- all directions issued by government be in writing, and tabled in the parliament;

- boards prepare corporate plans for approval by the relevant Minister(s). Each

corporate plan should contain appropriate financial and non-financial targets,

including target rates of return on assets;

- governments clearly specify and make public the community service obligations they

expect the enterprises to satisfy. Their costs should be funded by direct budgetary

payment;

- they be liable for all taxes and government charges (or their equivalents);

- they be made subject to the Trade Practices Act and no longer be excluded from the

coverage of the Prices Surveillance Act; and

- they be free to determine their terms and conditions of employment, not subject to the

constraints of government employment policies and practices.

• State and Territory road agencies should be predominantly responsible for planning and

managing road infrastructure. Where these agencies of local government maintain a capacity to

build or maintain road works themselves, the allocation of such work should be the subject of

open, competitive tender.

• Transport prices should be restructured so that they more closely reflect the cost of providing

services. In particular:

- there should be a greater differential between peak and off-peak prices; and

- prices should increase with distance travelled in such a way as to reflect the

incremental costs associated with the additional distance.

• In setting access fees for use of infrastructure, all the incremental costs of infrastructure

provision which are associated with an individual users should be charged to them, and users

should make some contribution towards the remaining costs of infrastructure. The contribution

to the remaining costs should be negotiated between the infrastructure provider and the user, subject to fair access principles.

• Priority should be given to restructuring public transport fares so that they more closely reflect the costs of providing individual services, to improving service quality, and reducing costs.  Any fare increases should be accompanied, if not preceded, by improvements in service quality and should be phased in over several years.

• Value capture, or contributions from non-users who benefit from urban transport, can be useful to help fund transport infrastructure. To realise its potential benefits, value capture has to be negotiated.

Australia’s cities. The main problems of local air pollution from motor vehicles are in

Sydney and Melbourne. In the absence of corrective measures, as other cities grow in size,

they also could encounter decreased air quality.

• The economic costs of pollution in Australian cities remain unclear. There is a need for

further careful assessment of the costs of pollution.

• Measures to alleviate pollution need to be carefully targeted, so as to minimise the costs

imposed on those responsible for causing the problem.

• Emission standards for vehicles are playing a role in ameliorating pollution. They should

continue to do so. Standards should continue to be based as far as possible on performance

outcomes rather than technical design characteristics of equipment.

• The control of emissions resulting from these measures will increasingly take effect as the

old car fleet in our cities is eventually replaced by newer vehicles. Reductions in motor

vehicle tariffs should assist this process.

• A system of random emission tests, with fines or loss of registration for 'dirty' vehicles,

should be implemented in Australia's larger cities, where pollution problems are most

severe. Alternatively periodic testing of vehicles, say every five years, could be required

for registration. The emission standards for such testing should be set according to the age,

type and model of vehicle.

• The Commission does not favour subsidisation of public transport as a cost-effective means

of reducing the environmental impacts associated with transport. Wherever possible,

environmental impacts should be addressed by well targeted policies.

The cost of meeting various social objectives should be made explicit by identifying the

costs of providing concessions to particular groups and the incremental costs of providing

non-commercial services.

- Concession fares should be set in a way which gives the same proportional reduction in

fares, of say 50 per cent, for both peak and off-peak concession travel.

- Transport concessions for the elderly should be targeted at those in need and not

provided universally.

- To improve accountability and ensure that appropriate allocations are made among

expenditure items within the education budget, subsidies for the travel of school children

should be funded explicitly from the education budget.

MAIN FINDINGS AND

RECOMMENDATIONS

- Transport concessions should be available throughout the city to people who satisfy

eligibility criteria, and not restricted to those who have access to particular public

transport providers.

• There is scope to introduce some competition into the supply of subsidised services. For

example, contracts could be let to supply after-hour services, or services to particular locations

which would be open to public buses, private buses, taxis and rail services. This process would

replace many mode-specific CSO payments.

• Every effort should be made to eliminate quickly all unnecessary restrictions and regulations on

importing modified vehicles into Australia for use by people with disabilities.

However it would be impractical to make local government, as it is presently constituted,

responsible for planning an entire urban transport network, particularly in the larger cities.

Local government does have an important role to play in planning land use, transport

infrastructure and public transport services.

• Whatever the urban transport responsibilities of local government, they will have little effect

without adequate funding. The Commission appreciates that this point impinges on the

financial responsibilities of the three levels of government in Australia, a matter which goes

beyond urban transport. Yet it needs to be resolved if urban transport is to be delivered more

efficiently in our cities.

• The Industry Commission considers that the question of continuing to include the urban transit

category in the Commonwealth Grant Commission processes is complex and warrants further

consideration as to both principle and method, particularly in light of the increasing

commercialisation of Australia's urban transport agencies. However, the Commission

appreciates that such an assessment would need to take place in the context of a broader review

of CGC processes.

The efficiency of our urban transport systems has a large impact on the daily lives of most

Australians, of whom around 85 per cent live and work in urban areas. Every day, millions of

individual journeys are undertaken within our cities. We use our transport systems to go to work, to

go shopping, to engage in leisure pursuits, and for many other day-to-day activities, as well as for

supplies of goods and services. More efficient and better coordinated transport systems within our

urban areas permit better access to jobs and to education and recreational opportunities. They also

make for quicker and more efficient movement of freight with benefits to industry and to

international competitiveness. In short, an efficient transport system is essential for a city to

function effectively as an economic and social system.

In recent years there has been growing public debate on the efficiency of urban transport systems.

There is concern about:

• escalating public transport deficits and their contribution to State's debt;

• patterns of urban development (for example, suburban sprawl) which some see as inefficient

and unsustainable;

• lack of adequate access to transport for many people in the community;

• the contribution of urban transport systems to environmental problems (for example, noise and

air pollution);

• traffic congestion and road accidents; the reliability, safety, and comfort of public transport;

and

• impediments to the growth of efficient and flexible transport options.

The terms of reference for this inquiry were prepared in consultation with State and Territory

Governments and are reproduced in full on page xviii. The Commission was asked to report on

factors affecting transport operations in Australia's major metropolitan areas and larger cities and

towns which lead to inefficient resource use. Priority is to be given to areas of largest potential

gains in efficiency and where early action is practicable, with advice on potential implementation

strategies.

Specific issues set down in the terms of reference include the provision, pricing and subsidisation

of, and access to, urban transport services; the relationship between transport systems and patterns

of urban development; the impact of Commonwealth and State Government taxation and funding

of urban transport systems; barriers to private sector investment in urban transport; work practices;

the external benefits and costs of urban transport; and the social, environmental and economy-wide

implications of current urban transport services and possible changes to them.

The terms of reference for this inquiry are very broad.

The Commission has focussed on transport within urban centres including not only State and

Territory capital cities but also other provincial cities such as Newcastle, Geelong, Toowoomba,

and Launceston. Transport between major urban centres does not fall within the terms of reference

except where there is a significant daily transport flow (for example, between Geelong and

Melbourne).

The Commission appreciates that freight, commercial and business traffic represent a vital part of

the urban transport task, and has taken this into account, particularly in dealing with issues relating

to road use. The Commission has not, however, conducted an in-depth examination of the urban

freight transport industry. The Commission understands that the urban component of major

interstate freight corridors will be part of the inquiry being conducted by the National Transport

Planning Taskforce.

In accordance with the Commission’s policy guidelines, in examining the issues and formulating

recommendations, the Commission has had regard to their effects on urban systems and the

economy as a whole, rather than. from the single perspective of transport efficiency.

The Commission has sought to offer solutions to the problems in urban transport systems as they

exist today, and to recommend changes which will allow the systems to develop so as to meet the

needs of the future.

Cities differ in their history, patterns of development and transport policies. Priorities for transport

reform consequently also differ. The Commission has not formulated detailed plans for individual

cities or towns. Rather, it has sought to identify broad policies which, if implemented at the local

level, will lead to better ways of moving people and goods about urban areas.

As noted earlier, the Commission was asked to focus on those areas where greatest efficiency gains

are in prospect and early action is practicable. There are short-term and longer-term options for

reforming urban transport. Some changes could, in the Commission’s view, be implemented

without delay while others necessarily involve longer time frames (for example, those relating to

urban form). The Commission’s approach has been to canvass the full range of options but to

prioritise recommendations for reform and map out a program for implementation.

In preparing this report, the Commission has drawn on information from a wide range of sources. It

released an issues paper early in the inquiry and received evidence in submissions and at two

rounds of public hearings. Approximately 340 submissions were made to the inquiry. The

Commission also held informal discussions with a range of different interest groups including

Commonwealth, State and local government interests (regulators, public transport authorities and

road agencies), unions, user, pensioner and other community groups, and other interested parties.

These discussions and industry inspections were held in all States and Territories in Australia and

included regional centres as well as capital cities. The Commission visited briefly several other

countries during the inquiry: it has been able to examine at first hand experience in New Zealand,

Singapore, Germany, Switzerland, the United Kingdom, Ireland, the United States, and Canada.

The Commission also arranged two consultancies: one to examine performance in the Australian

urban bus sector, and another to compare the performance of urban bus operations in the United

Kingdom and New Zealand with those in Australia. These reports are available on request and are

summarised in appendices E and F.

Further information regarding the conduct of the inquiry is at appendix A.

This report is in two volumes. Volume 1 (this volume) contains two parts (A and B) while Volume

2 contains part C.

Part A discusses urban transport as a system and provides the reader with a broad overview of the

issues. This commences in chapter AI with a discussion of the relationship between transport and

city development. This is followed by an overview of the patterns of urban transport in Australia

(A2) and an assessment of how well our urban transport systems are performing (A3). Chapter A4

examines the role of governments in urban transport, and leads on to a discussion of reform of

government agencies involved in urban transport in chapter A5. More fundamental reform,

involving the injection of competition, is the subject of chapter A6. The issues of pricing and

investment of urban transport are then discussed in chapter A7. Equity issues, including ways to

increase accessibility for the transport disadvantaged, are examined in detail in chapter A8. Chapter

A9 examines issues associated with the use of roads, motorists and the problem of congestion.

Chapter A10 addresses what have been termed the adverse impacts of road use, accidents and

pollution. Chapter All draws together the Commission’s conclusions and recommendations and

proposes a package and timetable for reform.

Part B of the report examines in depth the components of the system. Chapters BI and B2 cover

fixed track modes (urban rail, and trams and light rail). Chapter B3 examines urban route bus

services. More flexible modes (taxis, hire cars and community transport) are examined in chapters

B4 and B5 respectively. Cycling is the subject of chapter B6.

Part C of the report (Volume 2) contains supporting appendices including detailed productivity

studies and other background information.

THE CITY AND

TRANSPORT

People who live in cities have access to a wider range of economic and cultural activities than they can

in rural areas. Transport helps make that possible.

Transport is a significant influence shaping the urban environments in which the majority of

Australians live. Because objectives for cities vary widely through the community, central issues are

the sort of cities we want and how differing objectives can be best accommodated. A key question for

this inquiry is how urban transport can best contribute to the well-being of those who live in cities.

The Commission addressed some of the general questions of city planning and development in its

In order to consider what sort of transport systems we want, we must first consider what we seek from

our cities. After all, transport systems are, in the words of the Royal Australian Planning Institute, ’one

element of a very complex urban structure’ (Sub. 304, p. 1). A number of participants argued that the

ideal city structure could only be determined after careful consideration of the purpose and benefits of

urbanisation.

Objectives for city life vary among individuals, communities and cities, although there are several

common themes. Cities consist of large concentrations of people, and we expect cities to provide a

wide range of goods and services, employment, educational, social and cultural opportunities to satisfy

a large variety of tastes and preferences. Some services, especially urban infrastructure such as roads,

water and sewerage, can often be provided more cheaply in cities by virtue of the higher density of

population.

The diverse range of objectives held for Australian cities was reflected in submissions to this inquiry.

The Coalition of Urban Transport Sanity (CUTS) suggested that city life was at its most beneficial

when it involved maximisation of exchange and minimisation of travel, drawing the Commission’s

attention to a ’rich intellectual tradition of urban studies’ which:

... recognises the original purpose of cities as a place of exchange for information, friendship, material goods, culture,

knowledge, insight, skills, and emotional, psychological and spiritual support, and seeks to place these values at the

villages which integrate living, shopping, recreation, social interaction, work and cultural activities into a compact

location. The approach seeks to put new life into local neighbourhood centres as a place of community interaction.

This requires transport forms which facilitate this exchange, not just movement. (Sub. 250, p. 2)

Like CUTS, many participants emphasised the role of transport in achieving these objectives. The

Coalition of Transport Action Groups argued that ’the search for a solution to the recognised problems

of urban transport should be approached from a vision of a better functioning, more pleasant, healthier

city and the means to achieve that goal’. The WA Government considered that:

A lack of suitable transport can prevent reasonable access to the majority of opportunities available for education,

employment, health care, adequate housing, recreation, shopping and social contact (Sub. 170, p. 49).

The Commonwealth Department of Human Services and Health emphasised that transport’s role was to

serve the city, while Dr Kenworthy described how he saw different transport modes creating better,

more livable, diverse and convenient cities. The Victorian Government argued that its recent reform is:

providing an opportunity for transport to play an affordable but central role in creating a revitalised, livable,

sustainable and economically competitive city... (Sub. 319, p. 10).

At the same time, city living brings costs such as loss of privacy, congestion of roads and public

facilities, and noise and air pollution. Controlling such impacts is a major concern of urban policy.

Many of these effects are intimately related to the provision of transport. For example, the amount and

mix of transport affects pollution, congestion and social interaction. More broadly, the availability and

price of transport affect the size and density of cities that can be supported. This is one reason why

policy towards urban transport is seen as a potential means for creating cities that better suit residents.

THE CITY AND

TRANSPORT

To what extent do urban form and transport systems, as they currently exist, reflect community

preferences and allow the achievement of people’s goals at least social and economic cost? Have past

and present institutional structures permitted changes in transport and urban form that reflect

alterations in cost structures and preferences? Or have we become bogged down in too rigid a system

that will be slow to take on new and innovative ideas or respond to changing needs?

Transport is only one of many influences on the way cities develop. Others include the preferences of

inhabitants, their incomes, the structure of production, land use planning and regulation, and

geography.

In Australia, comparatively high incomes combined with an abundance of land have played a key role

in the development of cities. The Australian dream of owning a relatively dispersed, free-standing

house with a garden, when associated with different phases in transport technology, also encouraged

relatively low density patterns of urban development. Geographic constraints such as rivers, harbours,

mountains and soil have also affected the nature of development in different ways in each Australian

city. Land use zoning, building and land title regulations have encouraged and facilitated low density

development, sometimes without adequate consideration of the cost of service provision, such as public

transport, to these developments.

Social changes have also influenced the shape of our cities. As Messrs Gargett and Hutchinson noted:

The two most dynamic trends that have affected the form of our cities since the middle 1940s have been the increasing

demand for housing (due to population growth) and reduction in the density of residential development (due to a trend

to smaller families). During this period our urban areas have largely grown out from and beyond the transport

infrastructure (fixed rail systems) which shaped them up to the 40s. This infilling and fringe growth has been made

possible by the increasing availability of private cars as a preferred alternative to public transport ... To date., the

response to the increasing demand for travel has been to build more transport infrastructure. (Sub. 56, P. 1)

The nature of economic activity in cities can also have a major impact on urban form and on the use of

transport. Australian cities show trends towards decentralisation of production and employment that

tend to favour the non-fixed track modes of freight and personal transport.

The Metropolitan Transport Trust of Tasmania said:

Our changing work patterns demonstrate that the geographic location of employment may be increasingly flexible.

The shift in employment from primary and secondary industries (particularly manufacturing) to tertiary industries

(including information, technology and service) necessitated a greater focus by governments on desired forms of

urban transport. (Sub. 148, pp. 23-24)

Other participants commented on the changes in communications technology since the 1960s which

have facilitated the ’suburbanisation’ of industrial and commercial activities and a trend towards

multi-centred, dispersed cities. The CSIRO Division of Building, Construction and Engineering

observed the impact this new technology is having on transport patterns:

The increasing integration of telecommunications and computing and their interactions with production, service

activities and transport, are changing land-use patterns and the resulting transport task ... Many of these activities are

choosing suburban locations as a result of increased freedom of location enabled by information and communications

technologies. Jobs are following people into the suburbs and because of the benign nature of many of these activities

they can locate close to, and in some cases within, residential areas. This is changing substantially urban transport

patterns, particularly commuting, shopping and freight movements. Cities are changing from essentially single-centred

to increasingly multi-centred. Transport patterns are changing accordingly, with multiple centres and multi-directional

flows. (Sub. 43, Appendix 1, P. 1)

The growth in suburban employment can be partly attributed to the growth in, the service sector.

Currently 77 per cent of the workforce is employed in the service sector, compared with 16 per cent in

the manufacturing sector and seven per cent in the primary sector (see figure AI. 1).

Source: ABS Catalogue 6201.0.

The continuing growth of the services sector -- the associated decentralisation of travel times and

patterns -- and technological and social changes will continue to impact on urban travel. Without

corrective action these trends seem likely to accentuate the dominance of the motor vehicle in moving

people and goods around our cities.

0

10

20

30

40

50

60

70

80

% of employed

persons

primary manufacturing services

1966

1991

THE CITY AND

TRANSPORT

The relative size and density of a city’s population also affects its transport needs. Typically, the greater

a city’s population density, the more it is suited to mass transit. However, increased populations also

usually lead to more congestion. It is not surprising that Sydney, the most populous Australian city

with the greatest congestion problems, has the highest percentage of public transport use.

Finally, government taxation and financial policy towards the provision of urban infrastructure is often

thought to be an important influence. This question was the subject of the Commission’s report on

Taxation and Financial Policy Impacts on Urban Settlement (IC 1993).

At the same time, methods of transport have had a major impact on the way cities have developed. The

availability of relatively cheap land on urban fringes, combined with technological advances in

transportation, has enabled cities to become both more populous and extensive. As different methods

of freight and personal transport have developed, cities have altered their forms: mass transit producing

corridor or linear development, the motor vehicle facilitating settlement between corridors. Box ALI

illustrates the historical relationship between transport systems, land use and urban form in Melbourne.

The Western Australian Government described the role of transport as ’critical ... in the achievement of

desirable forms of urban development’. It noted that:

... construction of roads and improvements to the public transport system alter accessibility within the region and,

therefore, have a substantial influence on the location and rate of major new development (Sub. 170, p. 22).

The impact of developments in transport has not been uniform, however. Cities reflect the history of

their transport systems. More recently settled North American cities, for example, have been able to

take greater advantage of developments such as the motor vehicle. Older European cities with

settlement patterns based on different methods of transport, can change only slowly because of the long

life and high value of many of their buildings and urban structures. As the Commonwealth Department

of Human Services and Health noted:

... the city forms we have now have been significantly influenced by the transport and land-use decisions of previous

generations. Similarly, today’s decisions will shape future transport and land use patterns. (Sub. 321, p. 8)

In 1835 the Port Phillip District of New South Wales was established on the northern bank of the Yarra

River, 2km from the river mouth at Port Phillip Bay. Early residential development was consolidated in

the inner east and south due to poor water facilities and unsuitable physical conditions in the west and

north. During this period, walking was the main method of transportation which constrained the spread

of residential development away from employment areas, although horses and bullock drawn carriages

were in use.

Manufacturing was initially, located in the western suburbs, influenced by the availability ,of cheap

land and its positioning between the city and the booming goldfields and pasture lands of the west.

Road development in this area was slower than in the eastern districts. Better climatic and physical

conditions attracted small scale farming to the east and a well developed grid-like road network

developed around the farm perimeters.

Melbourne’s first railway line between the docks at what is now Port Melbourne and Flinders Street

was opened in 18545. Over the next decade several other rail lines were established to the west, south

west, east and south east. The railways encouraged development up to 30 kilometres from the city

centre, but remained unaffordable for much of the population. Residential development continued to

focus on the physically superior east and south. According to Beed (1981), service provision to this

area was also cheaper, acting as an incentive to residential development. Poorer access to urban

facilities and physical conditions dampened demand for residential development in the west and north.

A horse omnibus service commenced in 1869, initially between the city and Firtzory to the north, and

subsequently further into northern and southern suburbs. These services were gradually replaced with

cable tram services from 1885. Over the next 5 years, cable lines were extended to many of the suburbs

immediately surrounding the city. The trams were comparatively quick and cheap, enabling many

workers to move away from the city centre. It encouraged development of areas located between rail

routes. Commercial development reflected the linear nature of the tram routes, typified today by

Sydney Road, Chapel Street and Toorak Road.

The rail network, combined with Melbourne’s topography, directed urban expansion from the 1930s in

corridors, particularly in the east and south. From 1967 Government urban planning policies sought to

reinforce these patterns, advocating growth ‘primarily along the along the general axes of principal rail

and road routes.’

Increasing car ownership in the post was period facilitated urban consolidation, initiated by the tram, to

continue, opening up development in the outer suburbs, away from the public transport routes. New

subdivisions filled in the areas between the radial rail lines, and lower density housing patterns

emerged. The advent of motor vehicles also increase the flexibility of urban freight movements,

enabling factories and warehouses to move away from wharves and rail sidings to cheaper industrial

sites on the city fringes. Examples include Clayton in the south-east and Broadmeadows in the northwest.

Source: Beed 1981

THE CITY AND

TRANSPORT

Partly because Australian cities were still developing when use of the motor vehicle became

widespread, Australian cities are much more like newer North American cities than those in Europe or

Asia (see table AI. 1). In terms of urban form, both United States and Australian cities have relatively

low population and employment densities. Older Asian and European cities have higher densities. In

terms of transport usage, cars are used less and public transport more in Australian cities, relative to

United States cities. When compared with European cities, Australians use the car more than twice as

often, and public transport nearly one half as much.

Car use (’000) 12.6 10.7 5.6 1.8

(passenger kms/ capita)

Public transport use (’000) 0.5 0.8 1.8 3.1

(passenger kms/ capita

Public transport 4.4 7.2 24.8 64.1

(% of total travel)

Walking/ cycling 5.3 5.4 21.3 25.1

(% of total journey to work)

Urban density (persons/ ha)

Population 14 13 54 160

Jobs 7 5 31 71

Source: Newman and Kenworthy 1992, p. 11

In light of these influences it is hardly surprising that Australian cities show a relatively high degree of

dispersion and car orientation. As the WA Government noted, ’no one expects that cities such as Perth

will, in the foreseeable future, become European-style public transport cities’ (Sub. 170, p. vi). Indeed

the Australian style of development is entirely consistent with a Picture of cities developed in

conditions of relative affluence with abundant cheap land and at a time of rapid technological advance

favouring car use.

Australian cities still exhibit a large variety of urban forms and structures, including their transportation

systems. This diversity reflects the variety of historical, topographical, cultural, economic and other

influences which pertain to each of the cities. They have developed differently in the past, and will

continue to develop differently into the future.

This shows a flexibility to respond to changes in economic and social conditions and changes in

technology. It illustrates the interdependence that Mr Cotgrove emphasised:

Urban growth has always depended on transportation technology. Transportation allows the specialisation of function

necessary to achieve economies of scale, which in turn leads to a spatial pattern of segregated, specialised,

interdependent land units. The demand for economic efficiency stimulates the need for improved transport systems,

while the development of transportation facilitates the opportunities for economies of scale. (Sub 160, pp. 1-2)

Although they can be altered, the complex determinants of current transport and land use patterns are

not readily overturned. As the Chartered Institute of Transport in Australia observed:

Once travel patterns have been established by the prevailing land use policies, infrastructure and generally poor level

of public transport service provision, it is difficult or impossible to change them without changing their determinants

... the impacts of and inter-relationships between changing economic structures, technology and the nature of work are

elemental to urban structure and consequent structure and pattern of urban transport demand and vice versa. (Sub.

106, pp. 5, 10)

A number of participants criticised the degree to which urban forms are based on motor vehicle travel.

It is often argued that car domination has reduced the amenity of cities, particularly by isolating those

with limited or no car access. For example, some new home owners are forced to locate on the

relatively poorly serviced fringe, and have limited choice between poor public transport and multiple

car ownership with its inherent high costs. Associated with this loss of access are concerns about

pollution, the greenhouse problem, oil vulnerability, and other adverse environmental impacts that are

The ability to establish and operate viable mass passenger transport systems has been compromised by the low density

of development, and the high level of employment dispersal. On a metropolitan basis, this has added air quality

problems to other concerns about the capacity of the environment to cope. At the local level, high volumes of vehicle

movement are reducing urban amenity. (NSW Government 1993b, p. 2)

A study of urban fringe families, conducted by the Australian Institute for Family Studies (AIFS)

(1993), addressed some of the issues associated with urban sprawl and arrived at mixed conclusions.

The study found that the majority of residents in Berwick, on the south-eastern fringe of Melbourne,

were not forced to locate on the urban fringe for reasons of affordability:

THE CITY AND

TRANSPORT

It must be recognised that the option of the detached house with its own backyard still has its place and that the

residents of Berwick eminently prefer to live in Berwick than in the inner city (AIFS 1993, p. 457).

At the same time, the study confirmed the view that public transport services on the fringe are

generally poor or non-existent. The majority of the driving age population was car dependent, with 98

per cent of households surveyed having at least one car. Journey to work times for the few people using

public transport were nearly twice as long as for car drivers:

The small number of families without a car or individuals who could not drive were at a substantial disadvantage.

Outside peak periods, public transport provision is poor or non-existent and it is inadequate for the lateral (rather than

radial) journeys that people make. Transport was a major problem for young people not old enough to drive, not only

because of lack of provision of public transport but also because of safety problems on public transport. (ALFS 1993,

p. 459)

The study concluded that, in many cases, the choice to live on the urban fringe involved a trade-off

between higher travel costs and fewer services on the one hand, and newer and larger housing in a

desirable environment on the other.

Closer settlement involves a change in living and activity patterns which can reduce the need for travel

and reliance on the motor vehicle.

Many participants argued that city life could be improved if higher densities of settlement could be

achieved in all or part of the city. One approach involves. the development of ’urban villages’. Dr

Kenworthy described the strategy:

A promising option to bring back diversity and choice into our cities would appear to be the development of urban

villages based around existing and future heavy and light rail lines. Urban villages would see a concentrated mixture

of housing, shops, work places, community facilities and open spaces mixed together to create a high quality private

and public environment. In these more intensely self-sufficient environments, walking and cycling would be viable for

many trips and fast, efficient rail transit and buses would be an option for longer radial and cross-city trips between

centres, because the public transport system would have the strong nodes and generally higher density residential

environments it needs to provide competitive levels of service. (Sub. 77, p. A-6-23)

The Town and Country Planning Association explained:

The central strategy in the so-called urban village is to maximise mobility by placing a maximum number of

destination (that is, outside the home) activities within close reach of the home (by walk, cycle, short car or transit

These clusters, which are really urban centres in a multi-centred city ... are strongly connected by rapid transit and

road. (Sub. 283, p. 1)

Alderman Masterman (of Leichliardt Council), an advocate of such a development strategy, saw the

inner-west Sydney suburbs of Balmain, Leichchardt and Rozelle developing into a series of urban

villages. He suggested that:

a policy where each municipal area would achieve one job for each person in the workforce within each municipal

area. ... if you didn’t take on that job opportunity that was within your suburb, that would be filled by someone coming

in from outside ... traffic automatically becomes two-way and instead of having this very coarse radial development of

cities, you would have a tapestry which is like a fine weave. (Initial hearing transcript, p. 743)

However, while some sections of the population seek higher density living, others can find it

unattractive. Troy (1992) has argued that prescriptions for urban villages are based on a ’highly

romantic’ view of life. He said:

Contrasts are drawn between elegant city development and ugly suburbia. Romantic pictures of cafe society are

painted which are inconsistent with how people actually live anywhere ... The romantic imagery of the ’urban village’

is built on a tragic - even deliberate -misinterpretation of village life. The appeal is to a middle class or gentrified form

of rural village which is not based on reality. (Troy 1992, p. 10)

There is of course a continuum of possible urban forms. A central issue is where Australian cities

should be along this continuum. The ACTU and Public Transport Unions reflected a common

sentiment when they said that they were:

... proposing a much greater emphasis on providing higher density residential living opportunities in the future than

there has been in the past, to cater for the substantial and growing section of the population who are likely to find such

arrangements more attractive and viable than detached housing on suburban blocks (Sub. 27 1, p. 7).

Some participants interpreted the Commission’s draft report as arguing against the concept of higher

density living and in favour of dispersed urban form. The Commonwealth Department of Human

Services and Health (Sub, 294, p, 1) suggested that the Commission had identified ’a low density form

as given’ and Dr Kenworthy said:

... the essential message that you’re conveying in your report is that the notion of urban restructuring away from

typical suburban sprawl towards more compact forms of development, especially urban villages linked to public

transport, is unachievable, if not undesirable (DR transcript, p. 138).

THE CITY AND

TRANSPORT

The Commission does not seek to prescribe (or proscribe) any particular urban form for Australian

cities. Rather, the key issue is how to determine what density best suits the wishes of residents, given

that people have a wide variety of preferences for urban living. There is a need to balance the

disposition of some for the urban village atmosphere and minimal travel against the desires of others,

who are prepared to accept longer journeys, for open space.

As the Royal Australian Planning Institute stressed, all our cities are different and consequently there is

no single, optimal urban structure, each city being required to develop ’home-grown solutions’:

... it should be recognised ... that solutions suitable to one city structure are likely to differ markedly from solutions for

another city. What may be more efficient in a strongly monocentric city, such as Sydney, may be less so in a strongly

multicentred city such as Canberra. (Sub. 230, p. 1)

Several participants cited Toronto as a model of a successful urban system. This particularly relates to

its achievements in terms of urban transportation and urban form. However, the durability of existing

urban and transportation structures together with the inherent differences between all cities, constrain

the extent to which the Toronto-style lessons are applicable to Australian cities.’ The Toronto

experience and the transferability of its lessons are examined in box AI. 2 and appendix G.

In attempting to determine how closely cities should be settled, there are some very difficult choices to

be made about how closely settlement patterns are regulated. Some participants stressed the costs that

arise when individual preferences are given free rein. Unconstrained choice may, in some

circumstances, compromise collective preferences about the urban environment (in the broadest sense)

such as those for clean air and attractive neighbourhoods. Put simply, choices that give individual

pleasure may give collective offence. The Commonwealth Department of Human Services and Health,

in response to the draft report, said:

It is optimism in the extreme to assume that a complex structure such as a city will somehow achieve optimality and

the social, economic and environmental objectives of governments through the sum of individual preferences in

response to pricing of transport and other infrastructure which reflects full costs (Sub. 321, p. 9).

A number of commentators pointed to Toronto as a model for integration between transport and land use.

Following the construction boom of the 1950s and 1960s in metropolitan Toronto, substantial investment

in the rapid transit and the major roads network was complemented with private sector development of

high density commercial and residential areas around subway stations. Planning strategies since the early

1980s have attempted to reinforce the interdependence between transport and land use. Dr Kenworthy

commented:

... Toronto has succeeded in increasing public transport’s share of the urban transport task and in

reducing car dependence in recent decades. Crucial to these achievements have been land use policies

which have brought significant residential development to its central area, have successfully

established transit-oriented urban centres involving mixed residential and commercial development,

and have increased overall urban densities. (Sub. 77, p. A-6-73)

Recent changes in the pattern of urban growth have begun to undermine this success. More than three

quarters of population growth in the last 10 years has occurred in the regions surrounding metropolitan

Toronto. The suburbanisation of industry and business and trends towards detached, single family

housing has encouraged low density settlement in these areas. Mr McManus noted:

While older areas of Toronto reflect the integration of transport and land use planning, the recent

expansion of outer Metro and the Greater Toronto Area has been based on the automobile. ’Vienna

surrounded by Phoenix’ is how a visiting Toronto, planner recently described the urban growth of

Toronto. (Sub. 11, Attachment 2, p. 10)

The outer regions are characterised by high levels of car use. While around 25 per cent of trips in

metropolitan Toronto are made on public transport, in the surrounding regions, public transit use is only

in the range of 7 to 11 per cent (Greater Toronto Coordinating "Committee 1992, p. 38). The Toronto

Commissioner of Roads and Traffic stated:

The driving population of Toronto is drawn from a vast and growing hinterland. Public transit is no

longer a one hundred percent solution - as it was conceived of in the seventies for moving people in

and out of downtown. To move everybody we’d need ten times the number of subway lines we have

now - and that would break us. (Sub. 11, Attachment 2, p. 10)

The picture which emerges is that Toronto, like all other cities, has its strengths and weaknesses. In terms

of urban system the linkage of transport and.’ land use is particularly evident in metropolitan Toronto.

However, to a large degree, the surrounding ,regions face the same challenges and costs as many other

cities.

It’s better to start from first principles and consider local conditions rather than simply following the herd.

(Juri Pill, General Manager, Administration and Planning, Toronto Transit Commission, 1992)

THE CITY AND

TRANSPORT

At the same time, if choices and individual preferences are inappropriately restricted, another set of

costs can arise. Indeed it is now being widely recognised that restrictions on location choices may well

have frustrated some latent demand for more innovative settlement patterns. The Town and Country

Planning Association said that:

It is often the UBRs [Uniform Building Regulations] developed in the 1950s which constrain the provision of suitable

residential subdivision and building forms, and practically force residential development to the fringes, rather than

permit a large proportion of it to occur by in-fill and reconstruction in established suburbs (Sub. 283, p. 3).

The Victorian Government has recently focussed on removing unnecessary impediments to planning

and redevelopment projects:

Striving for these [urban development] goals requires the provision of clear direction and purpose, but has nothing to

do with imposition of solutions by government on the urban community. Indeed the Victorian Government is

streamlining the planning system to greatly simplify planning schemes, reduce the number of zones and related

provisions, and remove unnecessary controls on desirable and straightforward projects. (Sub.319,p. 11)

When residents of cities make decisions about location, it is usually within a framework that has been

set by previous planning decisions about how urban land may be used. In particular:

• the 'development front' for the city has been channelled by zoning and other land use restrictions

with a view to preventing excessive demands on (economic and social) infrastructure;

• the type of development in particular areas has been prescribed with a view to preventing

conflicting land uses on adjacent properties, and limiting side effects (for example, encroachment

on borders and blocking of natural light) arising from unsympathetic construction; and

• transport links have been established.

Within that framework, individuals make their own decisions about location, exercising their

preferences about dwelling types and travel patterns, and responding to the price of land, construction,

local amenity, transport costs and a host of similar considerations.

Planning is, and will remain, an indispensable aspect of urban development.

Planning is needed to ensure that land uses are compatible. The community has legitimate concerns

about the ability of an unfettered market in urban land to deal adequately with incompatible land uses,

environmental effects, and coordinated development.

However, zoning and other restrictions may have detrimental impacts on other activities, such as the

provision of transport services. Land use planning should allow population density to vary so that the

potential for transport to generate patronage can be realised. This is increasingly being recognised, as

the Commonwealth Department of Human Services and Health noted:

... many of the initiatives of Commonwealth Government and of state governments in this area are designed to relax a

lot of that regulation to in fact open up choice to allow, for example, medium density housing in places where

previously that hasn’t been allowed, to encourage or allow mixed uses in areas where previously regulation has

separated uses out (DR transcript, p. 253).

Similarly, unnecessary restrictions on subdivision design which create difficulties for buses, garbage

trucks, fire engines, freight and other vehicles should be avoided. On the other hand, subdivisions

should not be planned only with transport in mind. Sometimes potential residents who expect to rely on

car travel, for example, might prefer a street design that deters public transport. Provided developers

are able to factor in the extent of demand among potential purchasers for this design over one which

encourages public transport to residents, the potential for inefficient provision of transport is avoided.

It is important to ensure that the costs of a particular settlement pattern are sheeted home to the

residents who choose to live there.

The need for transport planning arises in a number of ways. In the first place transport providers are

obliged to assess the need for investments and make complex decisions about the type and magnitude

of investment. Requirements for planning of this type affect roads authorities and public transport

providers alike.

More than this, however, as chapter A7 shows, major transport. investment decisions are sometimes

made in situations in which it is not possible to pass the costs of transport provision on to those who

ultimately benefit.

For example the costs of major investments in rail lines are difficult to recover from those living in the

railway’s catchment area, either in fares or in levies. Some investments in major roads are also not

recovered. When costs cannot be passed on, the price system is more restricted in its capability to

perform its allocative role and developers will not receive the appropriate signals about the costs of

developing in particular areas at particular densities.

THE CITY AND

TRANSPORT

In those cases other infrastructure authorities and developers need to be informed about which areas the

transport authorities see as both potentially beneficial or potentially too costly to service. Otherwise,

costs of major transport links may not be taken into account in development plans and inefficient

settlement take place. For that reason some initial signalling of such potentially viable areas through an

For too long planners have failed to integrate transport considerations into urban development and there has been a

lack of foresight in transport infrastructure and service planning. There is recognition in all sectors of government and

in business and general communities that the transport modes need to be planned and operated in a more

comprehensive and coherent manner and that transport needs to be an integral part of land use and economic planning,

rather than an afterthought. In the absence of the integration, transport investment and service development will be ad

hoc and fragmented and the efficiency benefits reaped from recent reforms will not be optimised. (NSW Government

1993b, p. 2)

Mr Cotgrove argued that planning responses were unlikely to turn back long term social developments

which impact on urban form:

Whilst a socially optimum level of public transport provision is essential to cater for the travel needs of those without

access to personal transport ... and as an alternative backup system for those who do, and whilst planning strategies

that promote urban consolidation by enabling people to live at higher densities of their own choosing are to be

encouraged, it is a gross mistake to believe that the poly-centred, low density, arealand time-spreading patterns of our

motor-age cities can be reversed by the public transport-led policies advocated by the anti-car lobby.

On the contrary, there is every evidence to suggest that these deconcentrating trends will continue well into the future

as car ownership continues and as society moves into the post-industrial era. (Sub 160, p. 6)

When economic incentives favour a particular development structure, planning may have limited

effectiveness in changing the direction of that structure. Some recent experiences with attempts at

creating greater degrees of self-contained development in Australian cities are discussed in box A1.3.

Others have highlighted strengths and weaknesses in the use of public transport provision to achieve

alterations in urban form (see box A1.4).

The more that prices of urban infrastructure reflect costs of provision, the more that planning by both

individuals and transport and planning authorities can be improved. According to the Department of

Human Services and Health:

... individuals must have a say in the planning of their cities and must to the extent possible, be able to express these

preferences through the prices they face for goods and services - the costs of which should incorporate all external

costs. This full accounting for external costs is essential if individual decision making is to reflect overall community

outcomes. (Sub. 321, p. 9)

It is clear, however, that current prices for transport of all forms are in many cases far removed from

those required to match costs of travel. For example:

• motor vehicle drivers do not meet the costs of congestion;

The New South Wales Bus and Coach Association (Sub. 97) described the history of a planned

development in Campbelltown, Sydney. Designed to be an urban centre in the 1970s, sufficient industries

were attracted to locate in the Campbelltown area to satisfy requirements for predicted residential

employment needs. A light rail corridor was provided in the town plan. The designated route duplicated the

existing rail line, but did not feed into it. This was consistent with the idea of predominantly intra-town,

rather than inter-town, travel.

In practice, a predominantly white collar population located in Campbelltown and commuted to the CBI)

for work purposes, while the industry workers commuted from the inner suburbs (where the industries had

previously been sited) to Campbenlltown. The planned light rail corridor proved unnecessary and a bus

connection to the suburban rail station was required which is hindered by congested streets not designed for

such a structure (Sub. 97, p. 23).

The concept of self-containment also underpinned the planning of Canberra’s regional centres, according to

the ACT Government (Sub. 167). These dispersed towns were designed to provide work, education,

recreation and shopping facilities for the surrounding district of around 100 000 to 120 000 residents. The

aim of this policy was to offer an attractive lifestyle, and economic savings in terms of travelling time,

congestion, parking and pollution.

Over time, however, there has been a significant decline in the degree of self containment, particularly in

the Belconnen and, Woden districts.’ A number of explanations have been offered including growth of

employment in the city. the location of educational ’ and child-care facilities, a relatively high likelihood of

job changes or, employer relocation, and the high incidence of two income families, with likelihood that at

least one worker will be employed in another district.

THE CITY AND

TRANSPORT

• users of public transport often do not meet even the operating costs of providing their travel; and

• environmental costs are met only imperfectly through design rules restricting emissions.

Thus, in many cases, price signals are being distorted, which hinders planning because the costs and

benefits associated with particular options are confused. Better pricing means better planning.

Without efficient prices to guide them, planners can, at times, end up with the wrong goals. For

example, there is an understandable temptation to attempt to reduce costs without regard to the value of

the outcomes to the residents of the city. The Australian Road Research Board pointed to:

... the single centred, high density city that would arise from the single objective of maximising public transport

effectiveness and efficiency. Such gains in public transport use are likely to be at the cost of greater trip lengths and

lower overall transport efficiency. Furthermore, from social, trade, manufacturing, building, individual satisfaction

and perhaps health and other points of view, such an arrangement may be far from optimal, and the net result may be

society’s loss. Similar suboptimal outcomes may follow from proposals, which some witnesses will probably present

to the Commission, for urban structures and controls which strictly minimise the amount of total travel. (Sub. 126, pp.

1-2)

Th use of rail (especially light rail – see chapter B2) has been a key feature of proposals to improve cities

through achieving consolidation and reducing urban sprawl. Professor Hensher (1993) attributes this to

the ‘perceived permanency’ of rail. That is, developers will be more attracted to areas serviced by a fixed

track transit that to areas serviced by more flexible modes like buses, which are perceived as less

permanent, and therefore as more of a risk.

According to Cervero and Landis (1993), studies of the joint development impacts of several recent rail

systems have generally concluded that urban rail transit investments will generate significant land-use

impacts if:

• a region’s economy is growing; and

• there are complementary development programs in place, such as zoning policies, which support

lighter densities or more intensive land uses.

They also found that rail is not the only mode capable of inducing land use changes.

Cervero argued, however, that their findings were influenced by the fact that existing pricing structures

fail to account for the full social cost of private motor vehicle usage. He concluded that transit

investment would be likely to have a greater impact on land use and development than freeways in the

presence of accurate pricing structures.

More than that, however, when appropriate price signals are absent. a much greater burden is thrown

on planners to allocate resources. The ACT Government explained, for example, that one factor

influencing its policy on consolidation was the savings that could be made in the public transport

deficit if new development were channelled into inner areas rather than the fringe. Without questioning

the policy of consolidation itself, it is clear that if fares at least matched operating costs, much of the

responsibility for making such location decisions could be left to potential residents themselves. It is

they who would pay the fares, and they who would make the choices about whether those costs made

location worthwhile.

The achievement of desirable outcomes in urban transport will depend on much more than cost

minimisation. It requires also that full attention be paid to what people want from transport and what

they are prepared to pay for. It is this balancing of demand and costs of provision that suggests the

need to find market-based solutions wherever possible. While the need for planning is likely to remain

in major metropolitan areas, it can be facilitated by better pricing of transport.

In this way individuals can make choices about locations which incorporate the costs of their use of

resources and any costs imposed on others. The location pattern which emerges then relies less on

overall judgements about, for example, the appropriate density of development, but rather a conscious

comparison by individuals of the benefits of different locations to them with their costs to society. And,

importantly, different parts of the city can serve people with different preferences while still reflecting

the collective preferences of the community.

THE CITY AND

TRANSPORT

The South Australian Government summarised the order of priorities well when it said:

Solutions cannot be imposed on society, at least in an area ... where impacts will be felt so widely. Policies for urban

transport will need to emphasise flexibility and to conscript market mechanisms wherever possible to enable

conscious decisions to be made about housing and transport with the full knowledge of the costs, benefits and

implications. (Sub. 144, p. 9)

URBAN TRANSPORT

PATTERNS

As the Western Australian Government put it, ’we travel to get somewhere, or we seek travel by others

to bring goods and services to us’ (Sub. 170, p. 9). Dr Moriarty described the demand for transport as a

derived demand:

travellers are assumed to endure the outlays of time and money involved only in order to enjoy access to activities

outside the home such as work or shopping (Sub. 57, p. 2).

People travel around cities for a multitude of reasons. Data from Brisbane show clearly what is known

for the rest of Australia: that journeys to work do not represent the greatest proportion of travel. It may

surprise those caught daily in traffic jams and crowded public transport systems, but journeys from

home to work represent only between 15 to 20 per cent of all trips. Trips from home to shops account

for a further 20 per cent of all trips and from home for education, recreation and other purposes for

another 15 per cent. All these shares have been declining over the last decade (see figure A2. 1).

Making up the difference are journeys that do not commence at home, which have increased by 50 per

cent since 1976, accounting now for 30 per cent of all trips. This is explained by:

• a long-term increase in the proportion of women in the workforce, resulting in multi-purpose trips

for activities such as childcare and shopping;

• a greater emphasis placed on leisure;

• the changing nature of the economy: the increasing role of the service sector (resulting in a shift

away from a conglomeration of activities in the central city and the associated decentralisation of

work locations); and

• improvements in telecommunications, such as the advent of the facsimile machine.

Source: SEPTS1991

The Transport Research Centre (TRC) found in 1992 that journeys from home to work in Melbourne

represented only 14 per cent of all trips. A large number of journeys were undertaken in association

with the travel of others, either to drop someone off, pick up another person or accompany someone

else (see table A2. 1).

Work at workplace 18 6 14

Other work 2 0 1

Education 13 0 10

Shop 17 27 20

Drop off 1 pick up or accompany 24 20 23

someone

Social / recreational 19 45 26

Personal business 6 2 6

Total 100 100 100

0

5

10

15

20

25

30

35

Work shopping education recreation other nonhomebased

1976

1986

URBAN TRANSPORT

PATTERNS

As cities have grown, employment has to some extent followed residential location and there has been

less dependence on radial commuting patterns to the central city. Dr Kenworthy identified suburban

employment growth as ‘the biggest trend at present’ and noted that ‘most of it is dispersing rather than

going into identifiable sub-centres’ (Sub 77, p. A-6-4).

As a result, car-based travel has been increasingly favoured over public transport. As Dr Brotchie

noted:

The dispersed nature of origins and destinations ruled against the use of public transport for most people but suited

private transport (Sub. 43, Appendix 1, p.1).

that in relation to journeys to work in Melbourne:

• only 34 per cent of all people travelled to the central city for work and 34 per cent of these people

used public transport; and

• the remaining 66 per cent of all workers travelled to sub-central locations with less than 6 per cent

using public transport.

However, this information is based solely on journeys to work which, as noted earlier, only represent

about a quarter of all trips. If could be expected that the remaining journeys would be even more

dispersed. For example most shopping trips would be to regional centres or the ‘shop down the road’,

not to the central city.

This is not to say that radial traffic flows (for example, trips to the central city) are unimportant (see

figure A2.2). Professor Ogden noted the efficiency with which radial travel is served by public

transport:

... the central city with its attendant radial public transport continues to exist, and to this extent the future of that of the

public transport system is assured. It is dominated by peak period work travel, although much student travel and

tourist travel (probably mostly off-peak) rely on these services also. It is important to acknowledge that public

transport serves this radial market very well indeed. In Sydney, Melbourne and Brisbane especially, it is a high

capacity service, capable of moving large numbers of people quickly, safely and (mostly) reliably. Moreover, public

transport dominates the central city commuter market, at least in Sydney and Melbourne, with over half of central city

work trips carried on public modes. This is a very high market share on world standards for a low density urban area.

(Sub. 35, p. 3)

And as the Public Transport Users Association (PTUA) pointed out, radial routes are also used for

non-central city travel:

... long distance travel in Melbourne is dominated by journeys to the central city (radial trips in the classical sense),

and long trips to intermediate centres along radial corridors (the expression ’quasi-radial’ has been used to describe

them) (Sub. 96, p. 1).

Even so, the principal conclusion must be that the share of radial work-oriented public transport in the

total transport task is now relatively small. Professor Ogden’s calculations showed that in Melbourne:

... in round figures, work trips are about 30 per cent of all trips, the central city has about 12 per cent of the region’s

jobs, and public transport has about half the market for central city work trips. Multiplying these together, we can see

that this part of public transport is established to cater for about 2 per cent of daily trips in Melbourne!

URBAN TRANSPORT

PATTERNS

The much larger market - what we might call suburban travel - has a much lower market share for public transport. In

Melbourne for example, public transport carries only about 11 per cent of non-central work trips. (Sub. 35, p. 3)

The extent to which different modes of passenger transport are used varies from city to city. but is

dominated throughout by the private motor vehicle. On average nearly three-quarters of all trips are

made by car. In capital cities, this ranges from 74 per cent of all trips in Perth to 64 per cent of all trips

in Sydney (See figure A22.4). Car drivers make the majority of all these trips. Box A2.1 describes the

urban transport networks in Australian cities.

Walking is the second most common way of travelling. On average 16 per cent of all trips are on foot.

Sydney residents are more likely to walk to their destination (20 per cent of all trips) and people from

Perth are least likely to travel by foot (11 per cent of all trips).

Public transport is more widely used in our larger (and more congested) cities but still constitutes, on

average, less than 10 per cent of all journeys. This ranges from 13 per cent in Sydney to only seven per

cent in Adelaide and Perth.

Public transport is somewhat more important for the journey to work, at 13 per cent of journeys (see

figure A2.3), although even here nearly 70 per cent of people choose to travel to work by car.

Source: ABS 1993b

Percentage of workers

0

10

20

30

40

50

60

70

80

90

100

Sydney Melbourne Brisbane Perth Adelaide Hobart

Public

transport

Car

URBAN TRANSPORT

PATTERNS

Australia’s cities vary in their structure and transport needs. A common feature is the dominance of the

private motor vehicle in catering for transport needs and the involvement of governments in all aspects of

transport operations (roads and public transport).

Sydney is Australia’s largest city. The Sydney area extends to Penrith and Campbelltown in the West,

with Newcastle and Wollongong fast becoming part of Sydney with rapid rail and road links. Road

transport, and in particular private car travel, is the dominant form of transport in all these areas.

However public transport use in Sydney is the highest in Australia, nearly double the average, and 80 per

cent of workers use public transport to travel to the central city.

Melbourne, Australia’s second largest city, has extensive road, rail, tram and public and private bus

networks. Although public transport usage is declining, 50 per cent of all i, travellers to the central city

still use public transport.

Brisbane is the centre of one of the fastest growing regions in Australia, with the Sunshine and Gold

Coasts to the north and south, and the regional centres of Ipswich, Toowoomba and Logan City.

Although Brisbane is served by an extensive public sport system (rail and bus), other areas in south-east

Queensland are not.

Adelaide has road, rail and bus networks and one tram route. Public transport extends to the outskirts of

the city. One factor that affects Adelaide’s public transport network is the proportion of aged people that

live in the region.

Perth is served by road, rail and bus networks. The most recent feature of this network is the Northern

rail link, the most modern rail system in Australia. However car travel continues to dominate Perth’s

transport.

Hobart is ’a city heavily reliant on the private motor car for transport. Metro buses and us services

provide the bulk of public transport. Taxis supplement this and there or ferry service between Hobart ...

and Bellerive ...’ (City of Hobart, Sub. 168, p.1).

Canberra has an extensive road network and all public transport is on ACTION bus services.

Darwin is a city spread over a large area with a high degree of car ownership. The stem was designed for

cars and there is little or no congestion. Public Provided by Darwin Bus Services

Other regional centres around Australia are geared to private transport, experiencing little of the

congestion faced in larger cities, with private bus operators providing public transport.

Aggregate figures do, however, conceal the importance of public transport for some types of journeys.

For example, 52 per cent of commuter trips to Melbourne’s central area are by public transport and 80

per cent of workers in Sydney’s central city use public transport to get to work (Victorian Ministry of

Transport 1991).

The mix between public and private transport also varies according to the origin and destination of the

traveller. Car-based travel is more important to hose living at the fringe. For the journey to work,

reliance on motor vehicles varies from 40 to 50 per cent in inner areas in Sydney and Melbourne to 70

to 80 per cent at the fringe (see figure A2.5).

Source: NHS 1992a

The bicycle is also becoming a more viable transport option. The Bicycle Federation of Australia state:

Bicycle transport is a significant urban transport mode with a modal split close to that of public transport. … About

7% of all Australian vehicle trips in capital cities, regional centres and country towns are taken by bicycle. (Sub. 306,

p.1).

There are a number of factors affecting the long-term tendency for the increased use of motor vehicles.

These include its convenience, the comparative costs of alternative modes of transport and the

changing nature of the Australian economy.

Expenditure on transport is a major component of household budgets. As Austroads reported:

0

20

40

60

80

100

Core / inner Middle Outer Fringe

Sydney Melbourne

0

20

40

60

80

100

Core / inner Middle Outer Fringe

Sydney Melbourne

URBAN TRANSPORT

PATTERNS

Transport is one of the largest items of household expenditure (16.0%). This level of expenditure is much

the same as housing (15.9%) and a little less than food (18.3%), or household equipment and operation

(18.4%). (Austroads, 1993, p.8)

Over the last ten years the cost of operating a private vehicle has increased by about 110 per cent. over

the same period public transport fares have increased by about 160 per cent (see figure A2.6). this has

further added to the attractiveness of private vehicle use.

Source: BTCE 1993

The motor vehicle is the dominant form of transport in urban areas. It is used, on average, for over

ninety per cent of journeys, including almost all urban freight movements.

Urban roads help fulfil a variety of needs. These include commuting, business and commercial

activities, emergency services, recreation and, importantly, the movement of freight. They provide

access to a wide variety of vehicles including cars, motorcycles, various types of trucks, buses, light

commercial vehicles, and bicycles. The road reservation also provides crossings and footpaths for

pedestrians and bicycles. As the NSW Roads and Traffic Authority pointed out:

The road network is not itself a mode of transport but provides a system for a whole set of travel modes (Sub. 179, p.

14).

Passenger motor vehicles are by far the greatest users of roads (around 80 per cent of vehicle

kilometres travelled in urban areas), with light commercial vehicles the next most important users (13

per cent), and trucks (five per cent) and buses and motorcycles (around one per cent each) making up

the remainder (see table A2.2).

Cars 25 276 22 451 13 476 6 846 8 230 1 901 416 1 981 80 578

(31%) (28%) (17%) (8%) (10%) (2%) (1%) (2%)

Motor 238 190 267 85 122 21 14 31 969

cycles (25%) (20%) (28%) (9%) (13%) (2%) (1%) (3%)

Light 3 308 3 658 2 908 812 1 259 405 165 329 12 845

Commercial (26%) (29%) (23%) (6%) (10%) (3%) (1%) (3%)

Vehicles

1 584 1 338 1 016 343 424 185 29 70 4 989

Trucks (32%) (27%) (20%) (7%) (9%) (4%) (1%) (1%)

Buses 208 176 163 55 89 27 7 40 764

(27%) (23%) (21%) (7%) (12%) (4%) (1 %) (5%)

Source: ABS 1991b

Transport of freight in urban areas requires large resource inputs. The NSW RTA estimated that:

... approximately $40-45 billion per annum of Sydney’s economy is in industries primarily dependent on goods

movements. This represents approximately one-eighth of Australia’s GDP.

If the logistical aspects of non-service related urban industries represents 10% of industry’s total costs, then the value

of Sydney’s road freight task is approximately $44.5 billion per annum. (Sub. 179, p. 13)

It has been calculated that urban freight expenditure comprises approximately five per cent of GDP

(Ogden 1992, p. 20). Moreover, as Professor Ogden said:

.. about half of urban transport costs are associated with the movement of goods, not people. This means that the

provision of an efficient and reliable urban freight system is important to the economic development and growth of

urban areas. (Sub. 35, part 2, pp. 1-2)

Indeed, the importance of freight is increasing (see figure A2.7). Industry restructuring is generating

smaller. inventories and the increased use of trucks as mobile warehouses serving a wider number of

niche markets. These ’just-in organisational practices can only be effective if plants or retailers can rely

time c on quick delivery of goods. The NSW RTA stated that:

URBAN TRANSPORT

PATTERNS

This requires more frequent and reliable freight deliveries, often of smaller consignment size and specialist quality.

These are the strengths of road freight and will mean increased demand for road freight movements per tonne of

Source: Cosgrove and Gargett 1992

Such trends place a strong emphasis on the need for road space to be used efficiently. Congestion can

impose very large costs for freight movements (see chapter A9).

Travel in cars and buses remains a key component of road use. Although most car travel does not get

measured in GDP, it absorbs substantial time and material inputs.

Passenger journeys vary in their importance, as does the extent to which people can alter their mode of

transport and their time of travel. In 1991, 23 per cent of all passenger vehicle travel was business

related, 25 per cent was for journeys to and from work (primarily at peak times) and 51 per cent was

for private use (ABS 1991b).

Urban travel has almost doubled in the period 1971-1991 (see figure A2.8). This increase can be

attributed almost entirely to an increase in car-based transport since, over the same period, the amount

of travel by public transport has remained virtually constant, and public transport’s share of total

Journeys fell from around 13 per cent in 1971 to about eight per cent in 1991.

a Data excludes walking

b Road-based transport includes car travel, motorcycles, buses and non-business use of light commercial vehicles and trucks.

Source: Cosgrove and Gargett 1992

The trend towards the private motor vehicle is reflected in car ownership. During the period 1961 to

1988 the number of motor vehicles in Australia increased by over 150 per cent (see figure A2.9). Based

on trends in South Australia, the growth in car numbers has been faster than the increase in population

(see figure A22. 10).

URBAN TRANSPORT

PATTERNS

Source: ABS 1993b

Source: Hutchinson and Gargett (Sub. 56).

Car occupancy rates for all trips are falling and are now approaching one person per vehicle: while the

number of vehicles on the road is increasing, the number of people in each vehicle is falling. The

Western Australian Government said that between 1976 and 1986 car occupancy declined in Perth:

• overall from 1.38 people per car to 1.25;

• in the peak hour from 1.20 people per car to 1. 11; and

• for the Perth central area from 1.35 people per car to 1. 19 (Sub. 170, p. 5).

0

100

200

300

400

500

600

700

NEW Vic Qld SA WA Tas NT ACT Aust

1961 1971 1988

0

100

200

300

400

500

600

700

NEW Vic Qld SA WA Tas NT ACT Aust

1961 1971 1988

0

200

400

600

800

1000

1200

1400

1911 1921 1930 1940 1950 1960 1970 1980 1991

Population

Registered vehicles

Car travel dominates travel throughout Australia. The increasing number of multipurpose trips and

changing nature of the economy are just two of the factors which are leading to more dispersed travel

patterns throughout our cities. Even so public transport is still very important, especially when it comes

to radial trips, which still represent a large proportion of all travel in our larger cities.

While some trends in the patterns of travel are evident nation-wide, considerable differences between

cities remain. This suggests the need for flexibility to enable the transport system to develop in each

city. The mix of public and private transport is likely to vary depending on the history, geography,

demography, existing infrastructure and various travel patterns within each city.

69

Evaluating the performance of our urban transport systems needs to be placed in

the context of the diverse range of objectives held for Australian cities (see

chapter A1). An assessment of urban transport systems according to their ability

to meet broad community objectives such as those relating to urban form, equity

and the environment is discussed in chapters A1, A8 and A10 respectively.

This chapter focuses on economic performance. Measures which are commonly

used to assess the operational performance of public transport include financial,

efficiency, and service quality indicators. The provision of roads can also be

assessed according to such variables, but the measures used are usually different

from those used for public transport. As a starting point, the views of various

URBAN TRANSPORT

70

participants, including both users and non-users, provide a useful indication of

how urban transport systems are performing generally.

The views of inquiry participants about the performance of urban transport

varied considerably, reflecting their different interests and vantage points. It is

striking, however, that none of the about 340 submissions suggested that our

urban transport systems are working well. Common criticisms included:

unsafe);

During the inquiry, many participants criticised the quality of urban public

transport services.

The Public Transport Users Association (Sub. 96, attachment 1, p. 19) said that

in Melbourne, service frequencies are usually unattractive, especially outside

peak hours, and are becoming steadily worse. It described bus services in

Melbourne as ‘of an almost unimaginably poor standard’ (Sub. 96, p. 4). As

well, it quoted the Melbourne Metropolitan Planning Scheme Survey which

stated that Melbourne’s buses:

... in most cases act as feeders to rail and tram ... on account of infrequent service and

poor co-ordination the saving in walking time by use of a feeder bus is largely offset by

waiting time ... there are relatively few who can save much time by using them.

(Sub. 96, p. 4)

Messrs Burrt, Hill and Walford (Sub. 98, p. 5) indicated some reasons why

public transport services are unattractive: poor access, infrequent services,

unreliability, lack of safety, discomfort, and inconvenience.

Several participants expressed concern at the risk to personal safety on trains.

For example, the Western Australian Municipal Association said that:

People in Western Australia are reluctant to use the much improved electric train

service, because of perceptions about safety. This results from adverse publicity over

the years to hooliganism and vandalism on trains, especially at night. (Sub. 73, p. 3)

Participants also stressed the need for better integration of different modes of

public transport. For example, the NSW Combined Pensioners and

Superannuants complained about the poor coordination of train, bus and ferry

A3 INDICATORS OF PERFORMANCE

71

services in Sydney (Initial hearing transcript, p. 884). The Shire of Pakenham

bemoaned the poor provision of bus feeder services to join the rail network

(Sub. 25, p. 6).

Several user groups called for better information on public transport services.

For example, Rail 2000 said:

The communication and information issue is a very real issue about our public transport

system ... and it certainly is the case in other states (Initial hearing transcript, p. 90).

The Blue Mountains Commuter and Transport Users Association (Sub. 16, p. 1)

suggested that information on all services should be coordinated and be

available at central locations, such as the central railway station and general post

office.

is good (Sub. 174, p. 4). Other road users, and road builders such as the

Australian Road Federation, were also generally positive about the performance

of road systems in Australia. In a 1993 survey conducted by the Australian

Automobile Association (AAA), motorists ranked congestion number 10 in

importance out of 11 issues, whereas road safety was considered to be the most

important issue (Sub. 140, p. 10). Congestion was considered to be a problem

only in the larger cities of Sydney, Melbourne and Brisbane, and then only at

particular times and locations. Importantly, in terms of the economic gains to be

made from reducing congestion, around 70 per cent of the costs of congestion

are borne by the business sector (see chapter A9).

A major obstacle to the Commission assessing the performance of Australia’s

urban transport systems is a serious gap in information on the performance of

those responsible for building and maintaining roads (state and local

government agencies). The emphasis towards public transport in this chapter is

partly a reflection of the better availability of data on public transport operators

compared with the roads sector.

operating statistics on their operations. An example is the report of the Steering

Committee on National Performance Monitoring of Government Trading

Enterprises (1993), which includes performance indicators for government

public transport authorities. Nonetheless, information on performance is still

URBAN TRANSPORT

72

poor in many areas, notably in the area of service quality, and the costs of

providing individual services.

The Steering Committee had great difficulty gaining statistics on services delays

only Transperth reported separate figures for both modes from 1987 (Steering

Committee on National Performance Monitoring of Government Trading

Enterprises 1993).

Due to the differences in accounting practice between public transport

operators, certain financial indicators may not be comparable. Measures of

efficiency which compare physical quantities of outputs and inputs are often

more reliable than financial indicators.

The extent that operating costs are recovered from the farebox is a commonly

quoted measure of financial performance for operators of public transport

services.

This measure is affected by how revenues and operating costs are defined. For

instance, many public transport providers include government subsidies for

concessional fares as revenue. In other cases (for example, CityRail and the

State Transit Authority of NSW) such payments are included in the total figure

for community service obligations (CSOs). Capital expenditures (for example,

replacement of rolling stock, upgrading tracks, stations, bus-stops, and so on),

which are funded by government grants or loans, are excluded since they often

vary significantly from year to year. Government payments make up the

difference between commercial revenues and operating costs.

A3 INDICATORS OF PERFORMANCE

73

Figure A3.1 shows the percentage of operating costs of government public

transport authorities. Since operating costs are based on data reported by the

authorities, there may be inconsistent treatment of expenditures such as debt

interest, superannuation, and depreciation, and as such figure A3.1 should be

regarded as representing broad trends in the data. Government public transport

operators currently cover less than half of their operating costs from fares. If

non-fare commercial revenues (for example, from advertising, charter services,

and hire of facilities) are included, cost recovery is not increased appreciably.

0

5

10

15

20

25

30

35

40

45

Syd Melb Brisb Adel Perth Canb Hobart Darwin

1986-87 (b)

1989-90 (c)

1992-93

%

a Government payments to operators for concessional fares have been excluded from revenues in calculating

cost recovery. Figures exclude capital expenditures and, due to different accounting treatment, could also

understate interest, depreciation and superannuation in some cases. The columns for 1986-87 are based on

Commonwealth Grants Commission data. The columns for other years are based on data compiled by the

Australian City Transit Association (ACTA).

b Data not available for Canberra, Hobart, and Darwin.

c Data not available for Melbourne.

Source: Calculations derived from preliminary data provided by ACTA

Starrs 1994, p. 29

Authorities differ considerably in the extent to which fares cover costs, varying

in 1992-93 from a high of 45 per cent in Sydney to a low of 16 per cent in Perth.

Figure A3.1 also shows that:

from 39 per cent in 1986-87 to 45 per cent in 1992-93. The improvement

reflects higher cost recovery for both trains and buses;

1992-93, but fell for Canberra, Perth and Hobart;

URBAN TRANSPORT

74

87 and 1992-93.

Cost recovery for Australia’s government urban public transport operators is

below that of some overseas cities. For example, cost recovery in 1991 was 55

per cent in Munich, 48 per cent in Washington DC, and in 1992 it was 60 per

cent in Zurich and 66 per cent in Toronto (see appendix G). This compares with

cost recovery in the range 17 to 44 per cent for Australian cities in 1991-92 (not

shown in Figure A3.1).

Care needs to be exercised in making inter-city comparisons, however, since

revenues and expenditures may be defined differently, the modal composition of

public transport may be very different, and in some cases the costs of operation

may be affected by geographic and other factors.

Deficit figures as they are conventionally calculated can understate the total

costs to taxpayers of operating public transport. Apart from the problem of

concessional fares, reported expenditures often exclude or understate certain

items of expenditure such as interest, superannuation and depreciation.

The Commonwealth Grants Commission (CGC) has estimated the operating

deficits of state and territory governments in urban public transport, excluding

CSO payments for concessional fares from revenues, and including interest

(whether paid by the authority or by state and territory treasuries), payroll tax,

superannuation, and government subsidies to private bus operators in

expenditures. Depreciation is not included in the CGC figures.

The CGC’s deficit figures are shown in table A3.1. The CGC’s preliminary data

indicate that the combined operating deficits of all state and territory

governments on urban public transport amounted to $2.8 billion in 1992-93.

The CGC estimates that government subsidies to private operators of urban bus

services amounted to around $200 million in 1990-91 (including $95 million in

each of NSW and Victoria, and $3 million in the Northern Territory). Some

local governments (for example, in Brisbane, Rockhampton, and some smaller

cities in South Australia) also subsidise public transport, but these are excluded

from the CGC’s estimates.

The Commission estimates that if depreciation and local government subsidies

are added to the CGC figures, the total deficit in Australia in 1991-92 would be

in the order of $3 billion (before taking into account a rate of return on assets).

A3 INDICATORS OF PERFORMANCE

75

Estimates on a comparable basis cannot yet be made for 1992-93 due to gaps in

the available data.

1987-88 769 616 150 103 124 13 8 34 1817

1989-90 930 773 163 106 138 14 8 42 2174

1992-93 1133 1094 223 159 147 18 12 48 2834

87-88 to 92-93 +47% +78% +48% +54% +19% +38% +43% +40% +56%

public transport, and government payments to operators of community transport. Units expressed in current

prices

b Inclusion of Brisbane City Council’s subsidy to Brisbane Transport (estimated as one-half of the operating

deficit) would increase the 1991-92 figure to around $250 million.

Sources: Preliminary data supplied by the Commonwealth Grants Commission

Brisbane Transport (Sub. 99, p. 4)

Another way of looking at the sums involved in urban public transport is to

consider the amount which each household contributes, or each passenger

benefits from, on average.

Based on the CGC’s deficit figures, in 1991-92, the urban public transport

deficit averaged across all households was highest in Victoria (over $600 per

household), NSW and the ACT (both over $500 per household) — see table

A3.2.

1988-89 470 490 160 190 260 90 200 500 370

88-89 to 91-92 +23% +31% +31% +26% +12% +33% -10% +8% +22%

a See footnote ‘a’ to table 3.1 for coverage of deficit figures.

b Inclusion of Brisbane City Council’s subsidy to Brisbane Transport (estimated as one-half of the operating

deficit) would increase this figure to around $240.

Sources: CGC 1993, p. 87, 90

ABS 1993 d

ABS 1989

Brisbane Transport (Sub. 99, p. 4)

URBAN TRANSPORT

76

Some participants looked at the total funding of urban public transport,

including both operating and capital costs. For example:

capital costs (Sub. 189, p. 1);

deficit per metropolitan household in Adelaide would be around $600 if

capital costs are included (Sub. 56, p. 9).

The average urban public transport deficit per passenger (on government

operators only) in 1991-92 ranged from $1690 in Victoria to a low of $830 in

Tasmania — see table A3.3.

a Includes populations of 50 000 or more. Services include government operated services only. Deficits

include estimated debt charges (including on transferred debt), pay-roll taxation, superannuation, but

exclude depreciation, local government subsidies for urban public transport, and government payments to

operators of community transport. Government subsidies for services provided by private operators are also

excluded, since data is unavailable for the number of passenger boardings on private buses. All values are

expressed in current dollars.

b The deficit per passenger is obtained by multiplying the average deficit per passenger boarding, by the

average number of boardings per passenger per year (assumed to be 500).

Sources: CGC 1993, p. 90

Steering Committee on National Performance Monitoring of GTEs 1993

Commission estimates

One measure of efficiency in public transport is the amount of inputs required to

produce a given quantity of outputs.

Partial productivity measures involve calculating a ratio of an individual output

measure to an individual input measure. The conclusions which may be drawn

from such indicators are usually highly sensitive to the measure used.

Passenger boardings per employee for government operated urban public

transport in Australian cities is shown in figure A3.2 (passenger kilometres is a

better measure of output, but complete data are not available). Passenger

boardings per employee in Sydney (for rail, bus and ferry) increased by 35 per

cent from 1987-88 to 1992-93, mainly reflecting a significant reduction in

employee numbers. In Melbourne, they fell between 1987-88 and 1989-90, but

A3 INDICATORS OF PERFORMANCE

77

increased by 31 per cent between 1989-90 and 1992-93. In the other capital

cities shown in figure A3.2, the measure either showed little overall change or

increased slightly between 1987-88 and 1992-93.

15

20

25

30

35

88 89 90 91 92 93

Syd (train,bus,ferry)

Melb (train, tram, bus)

Bris (train,bus,ferry)

Adel (train,tram,bus)

Perth (train,bus, ferry)

Canb (bus)

H’bart (bus)

Sources: Steering Committee on National Performance Monitoring of GTEs 1993

ACT Department of Urban Services 1992, p. 19

Other data provided by public transport authorities

Total factor productivity compares an index of aggregate output with an index

of aggregate inputs, and provides a more complete picture of productivity trends

than partial measures.

As part of this inquiry, the Commission conducted a study of total factor

productivity for Transperth (rail, bus, and ferry), the State Transport Authority

of South Australia (rail, bus and tram), and the Public Transport Corporation of

Victoria (rail, bus and tram). Appendix D contains a detailed analysis of the

results. The State Rail Authority of NSW and Queensland Rail were approached

by the Commission, but were unable to provide appropriate data for the study in

the time available.

The main conclusions from the study are that:

between 1986-87 and 1992-93 (passenger kilometres as the output

measure results in a larger increase than seat kilometres). A fall in the

productivity of its urban rail operations was offset by passengers switching

from trains into buses;

URBAN TRANSPORT

78

productivity of Transperth (the extent of the decline is larger when

passenger-kilometres is the output measure). While the supply of services

has increased, inputs have increased at an even faster rate. There was a

significant shift in emphasis from buses toward rail during the period.

1990-91 and 1992-93; and

technically efficient in providing services. However, its services are not as

well patronised as those of the SA State Transport Authority. The PTC

generally is less technically efficient in supplying services than the other

two organisations, although it has better overall utilisation of services,

possibly due to the relatively larger population base serviced by the PTC.

Also, as part of this inquiry, Hensher and Daniels conducted a study of public

and private bus operators in Sydney, Melbourne and Brisbane (Hensher and

Daniels 1993). The study was based on 1991-92 data. The executive summary

of the study is at appendix E. The study found that:

operators within the same city by a margin of 30 to 45 per cent when the

output measure is vehicle kilometres; and

provided by public operators at a much lower cost.

In addition, as part of this inquiry, Travers Morgan conducted a study of private

and government bus operators in Australia, New Zealand and the United

Kingdom (Travers Morgan 1993a). An executive summary of the study is at

appendix F. The Travers Morgan study supported Hensher and Daniels’ finding

that private operators generally have a lower average cost of operation than

government operators in the same city. It also found little difference between

the productivity of the most efficient private operator in each of the three

countries studied.

A benchmarking study prepared by Travers Morgan for ACTION found that its

1991-92 unit costs were significantly higher than the other Australian public

operators and private operators included in the study (Travers Morgan 1993b).

Morgan found that the costs of urban passenger rail systems in Australia were

on average 36 per cent higher than international best practice, with a differential

in costs observable across most areas of urban rail operations (IC 1991c). Since

that study, a number of rail authorities have reduced their costs, notably

CityRail.

A3 INDICATORS OF PERFORMANCE

79

The State Transit Authority of NSW has been compared with a group of fifteen

international bus operators, both public and private (NSW STA 1993). On most

measures, productivity for the STA is lower than the average of the group.

The Commission acknowledges that it is often difficult to make useful

international comparisons, due to the different definitions of inputs and outputs

which are adopted, and differences in the public transport systems in each city.

However, it is noteworthy that for many of the measures for which data are

available, overseas operators often perform better than their counterparts in

Australia (see appendix G). For example, most Australian government-owned

public transport operators are able to carry about 20 000-23 000 passengers per

employee, with the State Transit Authority of NSW carrying around 30 000

passengers per employee in Sydney. This compares with 48 000 passengers per

employee for the Washington Transit Authority, 60 000 for BC Transit in

Vancouver, 91 000 for the Singapore metro, 111 000 for VBZ in Zurich and

138 000 for Trans-Island Bus Services in Singapore.

Poor productivity can arise either from using too many people and/or too much

capital to produce a given level of service or from producing the wrong

services. Both types of inefficiencies are evident in urban public transport

operations in Australia.

Inefficient management practices and excessive corporate overheads can lower

productivity.

At the initial hearings in Canberra, Mr Hughes stated that ‘ACTION does have

a superstructure of administration that is really unnecessary in many ways’

(Initial hearing transcript, p. 1224).

Hornibrook Transit Management criticised Brisbane Transport’s new depot,

saying:

... instead of building a $20,000,000 monstrosity out at the Mount Gravatt area you

build about half a dozen $2,000,000 depots around the outskirts of the city so we save

all this cost of time and mileage running vehicles (Initial hearing transcript, pp. 331-2).

The Victorian Government criticised the Public Transport Corporation’s

management of Melbourne’s bus services, saying:

Smaller buses, operated on more flexible routeings, may offer improved frequency and

longer hours of service. However, with less than a handful of exceptions, bus planning

URBAN TRANSPORT

80

in Melbourne has been limited to routes which can be served by large standard buses.

(Sub. 186, p. 26)

The NSW Bus and Coach Association claimed that:

... 77% of the excess costs incurred by the public-sector bus industry, compared to the

private sector bus industry, is nothing to do with the workplace. It is to do with poor

investment decisions, poor planning decisions and very high overheads. (Sub. 97, p. 28)

Further evidence on management inefficiency was provided during the draft

report hearing. For example, the Queensland branch of the Public Transport

Union (PTU) considered a negative aspect of regionalisation of the bus industry

in Brisbane to be the increase in overhead costs as a result of new positions for

regional directors and directors’ secretaries and assistants (DR transcript,

p. 438). Mr Seboa, president of the bus division of the PTU in Perth (and a bus

driver), noted the large increase in overhead costs associated with an increase in

administrative staff and office space, in contrast to an unchanged number of bus

drivers (DR transcript, p. 190).

The way that labour is used is one of the major sources of productivity

differences between modes and between private and public operators.

Employee awards within urban transport vary quite markedly. Workers in public

transport come under various awards. These awards specify minimum base rates

of pay and conditions only. Over-award payments and conditions may result in

differences between the public and private sectors even if coverage is under the

same awards. Conditions of employment generally are more generous in the

public than the private sector.

For example, the Australian City Transit Association reported that:

...on base award rates alone the STA (SA) operators are paid 25% more per week than

their private sector counterparts under the TWU [Transport Workers Union] award.

There are also significant differences in hours of duty, overtime and penalty payments,

annual leave and sign on/off allowances. The differences result in STA operators being

paid, on average, one third more than operators employed in the private sector.

(Sub. 174, p. 8)

This is often a result of weak competitive pressures and lack of financial

scrutiny. For example, Brisbane Transport said that:

... part of the Brisbane City Council is identifiable as ‘public’ service and as a result,

many employee benefits and other resources engaged in the delivery of bus services are

at costs higher than those which would apply to private sector operators. On the

surface, Brisbane Transport carries higher costs in the areas of superannuation, long

service leave entitlements, sick leave accrual and termination entitlements.

Furthermore, there are significant costs and constraints in shedding excess staff, in

contrast to the private sector. (Sub. 173, p. 35)

A3 INDICATORS OF PERFORMANCE

81

The awards under which public bus drivers are employed, compared with

private bus drivers, are generally less flexible and result in less productive

working time per shift. Mr Gable (Bus and Coach Association of Queensland)

believed work conditions are the major difference between the public and

private bus operators in Queensland. At the initial hearings, he said:

I think [the difference is] working hours probably. We find that the council is operating

under a 38-hour week, whereas the private sector operates under a 40-hour week for

starters. There are no rostered days off, there are no 10-minute breaks every few hours,

there are no huge workshops and depots with very expensive staff amenities. Basically

we employ people to do a job, and at the end of the time when they have completed that

job, they go home, and they come back again to do the job the next day. (Initial hearing

transcript, p. 316)

At the initial hearing, the State Transport Authority of South Australia said that

it was carrying approximately 330 people as redeployees out of a workforce of

about 3 000, due to public sector employment policies (Initial hearing transcript,

p. 17). The Metropolitan Transport Trust, Tasmania (Sub. 148) believed that

current public sector awards and superannuation entitlements introduce an

estimated ten per cent penalty on basic input costs. Additionally, TWU drivers

buses, refuelling, small tool work for minor maintenance, spot cleaning buses

and facilities.

One manifestation of the lack of competitive pressure on government-owned

agencies is the number of work practices which lead to productive

inefficiencies. As examples, the Australian City Transit Association listed the

following:

plus a meal allowance whether the overtime is required or not;

order to maintain their income at the same level as during school terms;

kilometres driven;

breaks;

p. 9)

The Commission received a range of evidence on less efficient workplace

practices in public transport operations compared to their private or international

counterparts. Several sources have pointed to the policy requiring bus drivers to

URBAN TRANSPORT

82

return to the depot for meal breaks in Melbourne, Perth and Brisbane. The

Victorian Minister for Public Transport recently drew attention to this:

Every PTC bus driver is obviously entitled to a meal break. But where, in the park? No.

On the bus? No. Each driver must return to base not, though, on a scheduled bus

door to door meal service. (Victorian Department of Transport 1993a)

Mr Seboa (of the PTU) noted that in Perth, train drivers are paid on a perkilometre

basis up to a maximum of 250 kilometres per day, or a maximum of

four hours, whichever comes earlier, often resulting in the drivers being

underutilised for the remainder of the day (DR transcript, p. 199).

Multi-skilling, by both management and operations staff, generally appears to

be a prominent feature of private operators. However, it is much less common in

public bus operations. Mr Crawford of the Mount Barker Passenger Service

stated at the initial Adelaide hearings:

... our three mechanics drive buses in the morning and in the evening for the short

school runs... So we don’t have to employ additional drivers for that purpose. The

manager of the business, who’s a director also ... he does some driving; he drives

services on a Saturday because we’re up for double time or time and a half, whatever.

So he does those on a cross-country service to save money. (Initial hearing transcript, p.

144)

Some work practices are restrictive compared with government-owned

operators in other countries. For example, the Victorian Government reported

that:

... the rostering limitation for electric train drivers, introduced after opening of the

Underground Loop, ... limits to four the number of times per shift that a Melbourne

train driver can be asked to drive his train from the tunnel into daylight. On London

Underground’s Circle line, drivers come from the tunnel into daylight up to 56 times

per shift without adverse effects, and without requiring additional payment. (Sub. 186,

p. 20)

The Commission appreciates that some public transport operators have taken

measures to address inefficient management and work practices. For example,

Melbourne’s trams are being reduced from two- to one- person operation and

the Victorian Government plans to negotiate to reduce split-shift restrictions on

Melbourne’s rail operations which makes ‘labour use less flexible and hence

more costly’ (Sub. 186, p. 21). The Victorian Government commented:

This component of the gap between costs and revenues is the present price Victoria

pays for inefficiencies injected by past industrial pressures and inadequate management

methods (Sub. 186, p. 21).

A3 INDICATORS OF PERFORMANCE

83

Opinion surveys of public transport users provide insights into the quality of

public transport services.

A 1991 survey by the Australian Bureau of Statistics conducted as part of the

National Housing Strategy found that the proportion of households with

children under 15 years who expressed difficulties in using public transport. The

proportion was 11 per cent in Sydney, 13 per cent in Melbourne, seven per cent

in Adelaide, and three per cent in Canberra (ABS 1991a).

A survey commissioned by the Australian Automobile Association (AAA) in

February 1993 indicated that 60 per cent of the motorists did not use public

transport because they regarded it as being too inconvenient (Sub. 140, p. 7).

A measure which is often used to gauge punctuality is the percentage of services

Recorded on-time running data for three of the urban rail authorities are shown

in figure A3.3. It should be noted that there is some scepticism about the

validity of the data. For example, the figures relate only to services which are

actually run, and do not take into account those which are cancelled.

On the basis of the reported data, on-time running for CityRail improved

considerably between 1988-89 and 1992-93. There has also been an

improvement in Perth since 1989-90. On-time running for Melbourne’s trains

deteriorated between 1987-88 and 1989-90 but improved again in the period to

1991-92. In Brisbane, on-time running for trains was low in 1991-92, at 84 per

cent (not shown in figure A3.3).

The Victorian Government noted in its submission that the percentage of train

services in Melbourne arriving within three minutes of schedule in the fourweek

period to 12 December 1992 was 75 per cent for the morning peak, and 69

per cent for the evening peak (Sub. 186, p. 24).

Japan Railways East, British Rail’s Network South East, urban rail operations in

Paris, and three operators in the United States have on-time running indicators

(within five minutes of schedule) in a range of 88 to 97 per cent (CityRail 1993,

p. 12). In Zurich, 97 per cent of public transport services arrive within three

minutes of schedule. Based on these results, there is substantial scope for trains

in Australian cities to be more punctual.

URBAN TRANSPORT

84

Year to June

80

85

90

95

100

88 89 90 91 92 93

Syd

(Cityrail)

Perth

%

Year to June

80

85

90

95

100

88 89 90 91 92 93

Melbourne

%

Sources: Steering Committee on National Performance Monitoring of GTEs 1993

Rail authority annual reports

The available data for on-time running of buses (available for only two

authorities) suggest that adherence to timetables is better for buses than for

urban rail. For example, around 99 per cent of government provided route bus

services in Perth and Canberra are reported to arrive within three minutes of

schedule. Apart from the direct impact of late running by trains, buses and

trams, the quality of service is worsened by secondary effects such as bunching

of vehicles, over-crowding, and congestion at stops and terminals.

The frequency of services is an important factor in determining the

attractiveness of public transport. Frequency of scheduled services is higher for

the peak than off-peak, and higher for bus and tram/light rail than for urban rail

services. Based on the published timetables, over the last ten years or so, there

has been little change in the frequency of urban rail services during peak times

and the interpeak periods. However, frequency of rail services has declined

during evenings and on weekends. The frequency of bus services has declined

in the morning peak, off-peak, and for evenings and weekends in most cities:

Sydney is an exception.

A3 INDICATORS OF PERFORMANCE

85

Travel time is an important influence on public transport demand, and on the

way travel is split between different modes. However, travel time reflects

factors which are beyond the control of the operator of transport services, such

as the patterns of employment and residence, and geography.

A survey of empirical evidence suggests that generally a 10 per cent reduction

in travelling time, with no other changes, would lead to an increase in patronage

of around three to five per cent (see appendix B).

Studies conducted for the National Housing Strategy (see NHS 1992a) indicate

that the majority using public transport in Sydney and Melbourne can arrive at

their destinations within 45 minutes. Average travel times to work tend to be

lower in Melbourne than in Sydney. Those living closest to city centres have

shorter travel times than those in outer suburbs.

Surveys by the Australian Bureau of Statistics indicate that average travel times

to work have remained broadly unchanged over time (see table A3.4). In

Melbourne and Adelaide, average travel times to work by public transport

decreased during the 1980s.

1971

All modes 30 24 21 na

1991

Public transport - male 40 35 35 30

- female 40 30 30 30

All modes - male 30 25 20 17

- female 20 20 15 15

na not available

Sources: Based on data in ABS 1974, 1984, 1991a, 1991b

In their responses to the draft report, many participants noted that there are

factors other than punctuality, frequency and travel time which are important to

users of public transport. For example, the Queensland Government (Sub. 327,

p. 3) noted that comfort, safety and convenience to origin and destination are

also important factors. The Commission agrees. However, it is difficult to

obtain indicators of these variables which can be used to compare different

operators.

URBAN TRANSPORT

86

The performance of urban roads can be viewed from a number of perspectives.

In this report, the focus is mainly on how well the current urban road network

meets government objectives for urban transport, and on whether the method for

providing urban roads is efficient.

The costs associated with road-based travel include the costs of building and

maintaining roads, as well as the costs associated with accidents, congestion and

environmental impact.

The Commission estimates that expenditure on urban roads in Australia was

approximately $2.2 billion in 1991-92 (see table A3.5). This represented around

40 per cent of total road expenditure in Australia in that year. It is estimated that

around $1.2 billion of the expenditures was on construction, and around $1.0

billion on maintenance. Table A3.5 also shows that construction expenditure on

urban roads declined in real terms between 1986-87 and 1991-92.

The figures do not include the costs of collecting certain government levies on

motorists, and policing the roads. Interest, and superannuation for employees of

road authorities and departments could also be excluded or underestimated for

some road authorities.

State and Territory Government road expenditures are funded by both

Commonwealth, State and Territory Governments, and local government

expenditures are funded by all three levels of government.

Urban road

expenditure

1.8 2.1 2.2 1.7

(of which)

- construction 1.2 1.2 1.2 0.9

- maintenance 0.6 0.9 1.0 0.8

a BTCE estimate.

b Commission estimates, based on preliminary data provided by the BTCE and NRTC.

c Based on the BTCE’s road cost deflator.

Sources: BTCE 1989

BTCE 1993

Commission estimates

Unpublished data provided by the NRTC and BTCE

A3 INDICATORS OF PERFORMANCE

87

Government levies on those who use roads include fuel excise (levied by the

Commonwealth Government), fuel franchise fees, registration and licence fees,

and stamp duty on transfer of vehicle ownership (the last four being levied by

State and Territory Governments). Vehicle owners also pay sales tax and import

duty on new or imported vehicles. These are levied by governments to raise

revenue, and in some cases to directly fund expenditures on roads.

Published information on the amounts of government taxes and charges on

motorists do not distinguish between urban and non-urban travel. Accordingly,

$6.2 billion in 1991-92 (see table A3.6).

Selected revenues apportioned to

travel on urban roadsa 6.0 6.2

(of which)

- registration/licence fees 1.1 1.2

- levies on use of petrolb 3.6 3.9

- levies on use of dieselb 0.7 0.7

- tolls (Qld and NSW only) 0.1 0.1

- stamp duty on transfer of

vehicle ownership 0.5 0.4

a For fuel levies, the urban travel component is estimated by applying actual rates of fuel levy to fuel

consumption by particular vehicle classes in urban areas. Registration, licence fees, and stamp duty on

transfer of vehicle ownership are apportioned to urban travel according to the urban share of total vehiclekilometres

in each State and Territory.

b Commonwealth fuel excise collections relating to on-road use, and State fuel franchise fees.

Sources: BTCE 1993

Data provided by the NRTC

Commission estimates

During the inquiry, some participants drew a link between road user costs and

revenue collected from road users, and also proposed alternative methods of

estimating costs and revenues (see chapter A7).

The efficiency in providing urban roads has two main dimensions:

URBAN TRANSPORT

88

society.

Inefficiency in the allocation of road funds could be reduced if there were

pricing mechanisms to guide the process (see chapter A7). The payments which

road users currently make to government are in the form of taxation rather than

payments based on the cost of actual road use.

Inefficiency can result from:

A9);

pollution and accidents (discussed in chapter A10); and

vehicle charging regime determined by the National Road Transport

Commission (NRTC) is aimed partly at addressing this issue.

important for freight transport. Inappropriate investment in road infrastructure

may lead to roads being built where they are not really needed and roads not

being built where they are needed. Chapter A7 discusses the problems

associated with appraisal of road investments.

A number of recent studies have focused attention on the performance of the

road sector. These studies mostly examine the efficiency with which road

authorities construct and maintain the roads which governments decide to build

(often known as technical efficiency), rather than whether the amount and types

of roads which are constructed are really the most desirable from the

community’s point of view (allocative efficiency).

A study by Kneebone (1993) for the Business Council of Australia concluded

that, for rural highways and main roads, the costs associated with road

construction and maintenance for Australia’s state road authorities compare

favourably with international practice. However, the Kneebone study was

unable to draw any conclusions in relation to the urban road network due to the

paucity of data. Also, there was insufficient information to assess the

performance of local governments, which are responsible for a large proportion

of urban roads.

In December 1993, the House of Representatives Standing Committee on

Transport, Communications and Infrastructure (the Morris Committee) tabled in

the Federal Parliament the report of its Inquiry into the Efficiency of Road

Committee said that:

A3 INDICATORS OF PERFORMANCE

89

The lack of hard evidence hindered the Committee’s investigations. The Committee

was supplied with mountains of information, but much of it was too general or could

not be substantiated. (House of Representatives Standing Committee on Transport,

Communications and Infrastructure 1993a, p. 2)

Nevertheless, it was highly critical of the lack of performance appraisal in the

road transport sector:

Never has so much money been spent by so many people over so many years, with so

little information collected, and analyses prepared, on how well the money has been

used (House of Representatives Standing Committee on Transport, Communications

and Infrastructure 1993a, p. 3).

During the present inquiry, several participants also pointed to the lack of

attention given to appraising the performance of road authorities. For example,

the Coalition for Urban Transport Sanity said in its initial submission that:

... virtually no attention has been given to business enterprise reform within the

agencies responsible for regulating, constructing and in some cases, operating the road

system. While Sydney’s State Rail Authority is expected to operate on an efficient

commercial basis, with assessment of improvements in key operational indicators being

measured against international standards, no similar performance criteria are applied to

the Roads and Traffic Authority. (CUTS, Sub. 20, p. 5)

In its submission on the draft report, the Coalition for Urban Transport Sanity

further commented that:

It is our judgement that waste and inappropriate investment is more rampant in these

agencies than GTEs (Sub. 250, p. 9).

In general, the performance criteria applied to public transport agencies have yet

to be applied to road authorities. The Australian Road Federation described the

present situation:

Under current arrangements the annual works programs developed by the road

authorities are designed to spend whatever amounts of money are made available by the

various governments for road works. Certainly, the governments concerned receive

advice on the amounts which the relevant road authority considers should be provided

for roads but this advice is oriented towards achieving a desired level of activity for

those engaged in providing roads rather than towards providing an effective road

system. It certainly falls far short of the advice required at board level to make

responsible investment decisions. (Sub. 248, p. 1)

A study prepared by the Allen Consulting Group (1993) for the Australian

Automobile Association, which examined the contribution to economic growth

of investments in land transport infrastructure, also said that public information

about road investment decisions is limited.

There are indications that the present allocation of road funding may be

inappropriate. For example, the study by the Allen Consulting Group found that

URBAN TRANSPORT

90

there is relative under-investment in major urban roads vis-a-vis local and rural

roads and:

... the historical pattern of investment has led to relative over-investment in local and

rural roads and under-investment in major urban roads. An economically optimal

pattern of investment should result in returns from investment in each category of road

being similar. Instead the results show higher returns from investment in urban roads

than from investment in local and rural roads. (Allen Consulting Group 1993, pp. ii-iii).

The study concluded that:

There is little basis for believing that the present level and pattern of funding of road

infrastructure is economically optimal (Allen Consulting Group 1993, p. ix).

A study by the Bureau of Transport and Communications Economics for the

period to 1987-88 also concluded that there was under-provision of urban roads

relative to rural roads (BTCE 1988, p. 32).

The National Road Transport Commission (NRTC) has recently begun work on

measuring and reporting on the performance of road authorities. This

in part to:

... assist in developing indicators for assessing the performance of the road system, the

efficiency and effectiveness of road authorities (including the Commonwealth and

those of local government) in managing that system, collate the information collected

by those authorities, and publish comparative assessments of the performance, of those

road authorities and of their road systems (Clause 17 (2) (b) of the Light Vehicles

Agreement (Schedule 2 to the NRTC Act).

Austroads, which is an association of the road authorities, is undertaking an

integrated set of projects on performance measurement (Sub. 255). These

include projects to develop performance measures of effectiveness and

efficiency, and to clarify the roles and objectives of the road system.

Based on mainly anecdotal evidence, the Morris Committee identified several

areas where improved practices would result in savings. For example, the NSW

Roads and Traffic Authority suggested that the implementation of maintenance

management systems could save up to $50 million per year, and Vicroads stated

that administrative cost savings of up to 50 per cent are available if local

councils shared resources ( House of Representatives Standing Committee on

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Transport, Communications and Infrastructure 1993a, p. 1-2). The Committee

suggested that existing inefficiencies in road construction and maintenance

across all levels of government lead to $1 billion of road works not able to be

undertaken each year (although the basis for this estimate is not reported).

The Morris Committee concluded that the major factors which contribute to

inefficiency of the road authorities included the stop-go nature of road funding,

the poor planning and coordination of road programs, the inadequate utilisation

of expensive road plant, and the smallness of road projects. While some of these

factors are beyond the direct control of the road authorities themselves, others

have to do with the inefficient way their activities are managed and organised.

The Roads Corporation of Victoria (Vicroads) has identified a number of

inefficient work practices in its road maintenance activities, including:

take their RDOs when weather conditions are conducive for completion of

maintenance tasks;

wishes to undertake more maintenance during the off-peak to minimise

traffic and operational delays. Currently off-peak work attracts overtime

entitlements;

their under-utilisation; and

time. Workers then travel to and from worksites during working hours and

return to the depot prior to cessation of work for the day. (Victorian

Auditor-General 1993)

Based on the available information, it can be said that Australia’s governmentprovided

public transport systems compare unfavourably with international best

practice on indicators of financial performance and productivity. There are

widespread complaints from users about the quality of public transport services.

Inefficient management and work practices are widespread within government

public transport. In recent years, many public transport authorities have

undertaken steps to improve efficiency and service quality. Measured indicators

of performance for some of the authorities have shown an improvement.

Although one study suggests that, for certain road expenditures (rural highways

and main roads), the costs of construction and maintenance in Australia

compare favourably with other countries, other studies indicate that there are

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inefficiencies within both state and local road authorities, and raise doubts about

the appropriateness of the current pattern of road expenditure.

93

In examining ways in which our urban transport systems might be made to work

better, a fundamental question is the role to be played by government. Indeed,

this inquiry is concerned with the choices government can make to ensure the

system works better. What is the rationale for government involvement? Are

current arrangements well suited to achieving the objectives? Even where there

is a case for government intervention, an important issue is the type of

intervention which will secure the best outcome. What are the core functions

appropriately undertaken by government and what is better left to the private

sector? And how should the tasks be divided between different levels of

government?

Urban transport services in Australia are provided by a variety of public and

private sector interests. Current government involvement in urban transport is

pervasive and complex. While the dominant government role in public transport

is obvious, private motor vehicles too are driven on roads constructed and

maintained by government. Box A4.1 broadly categorises the ways governments

intervene in urban transport in Australia.

In some cases most of these roles are combined within the one organisation.

One question is whether this is appropriate or whether certain functions should

be carried out by separate agencies. Some functions, particularly service

private sector.

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The present roles of governments in Australia can be broadly categorised as:

urban transport infrastructure within the context of metropolitan land use plans;

public transport services to be provided including their routes and frequencies;

services between modes and operators, tender out some services to private

operators, and some also manage integrated ticketing schemes;

play. For example, governments issue licences for the right to provide taxi and

bus services, determine maximum fares, and lay down safety regulations, such as

road rules, which must be followed;

roads, rail lines, bus stops, bike paths, and other items of urban transport

infrastructure;

Australia are directly operated by government-owned agencies;

governments as an arm of social policy through such instruments as fare

concessions; and

services.

In each State and Territory, governments operate public transport authorities.

Urban rail systems are run by state government monopolies. In the case of

buses, a mix of public and private operators prevail, but private operators

usually operate under licences or contracts specifying routes, schedules, fares

and so on. Taxis are mainly run by private interests, but are heavily regulated by

government licensing bodies.

State governments are responsible for the construction and maintenance of state

arterial roads. These functions are performed through the various state road

agencies.

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95

Transport (Queensland Department of Transport 1992)

Australian Government (Sub. 144, p. 18)

State departments of transport or their equivalents generally administer overall

transport policy. Other government agencies which impinge on urban transport

include urban planning and environment. The nature, extent and effectiveness of

coordinating machinery varies.

The scope of state and territory government involvement reflects the multiplicity

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Local governments also play a considerable role through their land use

regulations, funding of local roads, and provision of local public transport. The

Commonwealth Office of Local Government (Sub. 122) identified a number of

activities of local government:

bus/rail interchanges; and

planning.

Exceptions to State responsibility for urban transport occur in Brisbane,

Rockhampton and other smaller cities where the relevant City Council directly

operates or contracts out public transport services.

The role of the Commonwealth Government in urban transport is limited. As the

Department of Transport and Communications noted:

The States, Territories and local governments are responsible for the provision and

operation of urban transport infrastructure and systems. Traditionally the

Commonwealth has not sought to play a major role in this area. This reflects the

constitutional division of power, and the fact that State and Territory governments are

better placed to determine local transport operational and investment priorities. (Sub.

156, p. 4)

The Commonwealth nevertheless has an influence through funding grants to the

States and Territories allocated to particular modes and sometimes even to

specific projects. Commonwealth specific purpose programs include Building

Better Cities and Home and Community Care.

The Commonwealth also plays a major role through road funding, although its

direct responsibility is now limited to the National Highways System. Funding

for ı main roads and local roads to state and territory governments is to be

untied from 1994; such funding to local governments is already untied.

More importantly, general revenue grants from the Commonwealth are affected

by disabilities faced by the States and Territories in providing public transport,

while Commonwealth taxation policy has an impact on investments in major

transport infrastructure.

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The following discussion critically assesses the rationale for government

involvement in urban transport with a view to formulating some principles

which would maximise the effectiveness of government’s role.

Reasons commonly advanced for government involvement in urban transport

markets include:

Certain transport services may not be provided sufficiently or at all by the

private sector even though they are valued by users because of inherent

difficulties in charging for or excluding those who do not pay for the service.

For example, without government funding, roads would be under-provided.

Commercial incentives to provide roads privately are compromised by the need

to allow many entry and exit points from a given route (particularly for local

roads), presenting obstacles to the efficient collection of user charges.

While some roads would still be provided on a cooperative basis (like local

roads), and high traffic, longer distance toll roads would still be profitable (as

some are now), the lack of charging mechanisms for most existing urban roads

would make them unsuitable for access pricing.

However, the distinction between a ‘public’ and a purely ‘commercial’ service

is not always clearcut. Some participants argued that public transport also

possessed the attributes of a ‘public good’. For example, the Council of

Pensioner and Retired Persons Association (SA) Inc commented:

transport is a PUBLIC UTILITY, a PUBLIC SERVICE, the same as the Police Force or

the Fire Brigade. (Sub. 66, p. 4)

While it might be argued that public transport is not commercial in the sense of

being profitable, it differs from roads in that it is clearly possible to exclude

those unwilling to pay from using the service. One could argue, for example,

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that public transport is similar to electricity, or the telephone service. While

these services have also traditionally been predominantly supplied by public

utilities, few would argue that they should be provided free of charge.

Natural monopoly is said to occur when the least-cost way of supplying the

entire market for the service is by a single firm.

The existence of a natural monopoly in certain aspects of urban public transport

is seen as necessitating a role for government to prevent the exercise of market

power and possible exploitation of the travelling public. This role usually takes

the form of direct service provision and/or regulation of fares.

The natural monopoly issue is complicated by the nature of the outputs in

transport. An important distinction is between:

vehicle-hours, or seat-miles of service. These are known as intermediate

outputs because they need to be combined with user time to produce final

outputs; and

all is the ultimate purpose of urban public transport.

In the context of urban public transport the natural monopoly concept is most

often evident in rail, in particular the rail track and signalling. Potentially,

however, it may also be applicable to dedicated busways, light rail tracks and to

taxi communication networks. However, examples of natural monopolies are

becoming less evident as technology advances: for example, taxi

communication networks are being challenged by the use of mobile phones by

drivers.

Putting aside the issue of their existence in urban public transport infrastructure,

economies of scale generally speaking do not exist in terms of intermediate

outputs of urban public transport services. For example, Evans (1990) reported

that studies in the United States and elsewhere, including recent UK experience,

had found that unit costs of operating buses were not related to the size of the

operating company. That is, the operating costs were no higher if the services

were provided by several operators than by one.

However, if the costs to users are considered (that is, the demand side), some

commentators believe a natural monopoly may exist.

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An efficiently integrated transport network benefits all users (that is, reduces

their costs) simultaneously, and a beneficiary who has not paid for the integrated

service cannot be excluded. Hence, it is argued, there is an appropriate role for

government. Aspects of public transport services which may require

coordination include deciding on how services will coordinate with other

services and with other modes of public transport, and system wide integrated

ticketing if desired.

The elements of an integrated public transport network which may reduce users’

costs are outlined in box A4.3.

User costs include not only the fare paid, but also other costs such as users’ time

and in-vehicle time.

The concept of ‘user costs’ has important implications for the natural monopoly

issue. Mohring (1972) showed that transit service is subject to strongly

increasing returns to scale when waiting time (or any other user cost) is viewed

as part of the cost function, even if there are constant returns in producing

intermediate outputs (Small 1992). Similarly, Hensher (1993) argued that:

When one broadens the definition of economies of scale and network integrity to

include the benefits to users in the form of lower user costs (ie waiting times, service

uncertainty) with increasing patronage (which is more likely with a single operator), we

see an additional benefit of a natural monopoly. Economies of scale can thus be due to

increased benefits to users as measured by reduced user cost, even if the costs to the

operator of providing the service do not fall. Given that the local bus industry is

typically one of constant returns to scale, it is the user cost-benefit which supports the

idea of a natural monopoly.

A single operator may be able to provide a better service to passengers than several

operators using the same combined resources. A ‘better service’ is one with lower

average user costs ... With a greater prospect of attracting patronage to one’s services, a

single operator can schedule more integrated and hence convenient services than the

combined schedules of more than one operator. Connections could be more convenient

as well as ticketing (although inter-operator ticketing could be envisioned, but it would

be rather messy) and information dissemination.

Hensher is arguing that natural monopoly exists in local areas, and that

duplication over given routes is inefficient. This may imply that in some small

cities, such as Toowoomba (Queensland), a natural monopoly exists over a

whole urban area.

After reviewing the experience in Great Britain (except for London), Evans

(1990) argued that the value which passengers place on convenient connections

and ticketing arrangements means that bus routes can be natural monopolies. He

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considered that deregulated urban bus services in Great Britain lost patronage

because of scheduling inefficiency and inconvenience to passengers. Recently,

some operators have acted to provide a better service to passengers and increase

patronage and revenue, by coordinating their services.

‘User costs’ are the costs to individual users of consuming transport services, rather than

the cost to providers of supplying the service. Efficiently coordinated urban public

transport services can reduce these costs to users. Particular features of such a network

of services include:

their destination with minimal inconvenience while changing modes and operators;

minute intervals and organises its timetable so that a bus now arrives every 15

minutes, the scheduling efficiency remains the same. If the new operator timetables

services to arrive at the same time as the incumbent’s causing delays so that the

overall time between stops and result in a fall in scheduling efficiency, making the

user worse off;

reliable will lower user costs by reducing passenger waiting time and time spent

collecting and integrating the information; and

Passengers are able to purchase a ticket to take them to a destination; there is no need

to purchase new tickets for different modes and operators.

Source: Adapted from Hensher 1993

The STA (SA) believed that its public transport network in Adelaide ‘generates

significant passenger and community benefits’ (Sub. 268, p. 16). The Coalition

for Urban Transport Sanity regarded service coordination and integration as

vital:

Economic efficiency requires good integration across the whole transport network, not

unregulated competition which creams off passengers on heavily patronised routes and

leaves others unserved. A key to efficiency and service quality is an integrated ticketing

system which facilitates easy interchange between different transport modes and

operators. (Sub. 250, p. 11)

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And the Bus Proprietors Association Inc (Victoria) stated that:

Because the current ticket system is multi-modal, and bus operations have traditionally

been cross-suburban and/or rail and tram feeder services, coordination of modes is vital

(Sub. 84, p. 2).

However, a formal approach to service coordination may not be required in

every urban area or over the entire area. For example, Toronto seems to get by

having these functions carried out only in part of the conurbation and some of

the UK cities do not seem to require them to be carried out at all. Further, this

role may be less important where most trips do not involve transfers. For

example, the STA (SA) estimates that only 30 per cent of trips involve transfers.

There are of course, commercial incentives for operators to provide a better,

more coordinated service by cooperating with each other. But where service

coordination and integrated ticketing is desired, the existence of a natural

monopoly in user costs means that government intervention may be needed to

ensure that urban public transport services operate effectively as integrated

networks through the features described in box A4.3.

The availability of comprehensive and accurate information is seen by many as

a vital part of the overall transport service. For example, the Metropolitan

Transport Trust of Tasmania observed:

It is clear that for the 80 or 90% of people in a city that do not use public transport, one

of the biggest deterrents is knowledge. When does the train or bus come? Where does if

stop? Where can I catch it?, etc. Accessibility is more a matter of education and

information dissemination than purely frequency. (Sub. 148, p. 29)

In some cases there may be insufficient commercial incentives for private

operators to provide information, particularly as it relates to the total system.

This suggests a role for government in information provision. Judging from

participants’ submissions to this inquiry, however, the quality of information

available on public transport systems in Australia is often poor. In contrast,

European systems and regional councils in New Zealand place much emphasis

authority (see box A4.4).

Another possible ‘information failure’ relates to the issue of safety. It may be

impossible for a traveller to make an soundly based decision regarding the

safety risks of the public transport vehicle (eg. a taxi), he or she is about to

enter. That is, users would not be able to successfully calculate the benefits to

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them of taking a particular form of urban transport against the costs. This

information problem can be compounded by lack of competition in urban

transport provision. This may call for a role for government in safety regulation.

If the community expects a particular level of safety in urban transport

operations, and it will not be supplied by the private unregulated operator,

government involvement may be justified. As the Australian Road Federation

stated:

... government involvement should be limited to those activities which cannot

reasonably be performed by private enterprise and regulation should be kept to a

minimum consistent with ensuring public safety and protection of the public interest

(Sub. 13, p. 17).

An inadequate level of safety may be provided by a free market if operators do

not incur the full costs of damage or injury to passengers and bystanders caused

by an absence of safety measures. For example, those injured incur costs which

can only be retrieved through personal insurance or common law.

Such costs may justify more stringent roadworthy testing of commercial public

transport vehicles, regular testing for drivers and operators’ licence renewals

and more comprehensive requirements before an operator can hold a licence.

These regulations are appropriate regulatory activities for governments.

A public transport operator is not the most appropriate body to enforce such

regulations. Conflicts of interest may arise when one body is responsible for

enforcing regulations affecting the revenue-earning activities of the authority

itself as well as those of other operators.

Regulation of personal safety, an increasing problem both on public transport

and in private cars, is a major task of government through the police forces and

other security agencies.

One reason for government involvement in urban transport is that many

decisions taken by individuals do not take into account broader social costs or

benefits imposed by their own actions. Dr Kenworthy argued the case for

intervention as follows:

express as consumers, eg. the desire for cleaner air, safer streets and more convivial

urban spaces ... Expressed more generally, efficient, sustainable, equitable, and livable

cities are all urban ‘goods’ which people are likely to favour but which they cannot

city which they add up to cannot be so purchased. Indeed, the more limited horizon in

which consumers act often compromise larger and more public goals which are widely

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judged to be important but for which there is no ‘effective demand’. The combined

impact on the urban system of large scale car use, resulting from millions of ‘small’

consumers decisions in favour of convenience is a classic example. (Sub. 77, p. 140)

For example, use of urban roads generates adverse impacts in the form of

congestion, road accidents, and pollution. These costs are external to the

transport sector in the sense that they are not fully taken into account by those

imposing the costs.

Government intervention in urban transport is sometimes also seen as necessary

in securing the benefits of a city. For example, urban transport systems are seen

as providing benefits over and above the direct benefits to travellers, but also

contribute to the ‘livability’ of cities by making possible a greater degree of

social and economic interaction. This issue is discussed further in chapter A1.

The existence of these external effects is often seen as justifying government

intervention. For example, many participants in this inquiry saw subsidies to

public transport as necessary to encourage a modal shift away from cars, thus

reducing the adverse effects of private car use. As discussed in chapters A9 and

A10, however, other more direct ways of approaching environmental and

congestion issues may prove to be more effective.

Governments also intervene to assist the transport disadvantaged. Some

members of the community may not be able to afford adequate access to

transport due to low incomes and/or the high cost of transport to them. The

desire to provide public transport at a particularly low cost to pensioners, the

unemployed, the old and the young has provided justification for government

being involved in urban transport operations. Almost universally, public

transport has been provided at a loss because governments have been concerned

that it be accessible to as many people as possible at a price as low as possible.

The ACTU and Public Transport Unions considered that:

A fundamental social objective is to ensure that everyone in the community,

irrespective of income and wealth, ability/disability, or other factors, has access to

convenient and affordable transport services (Sub. 271, p. 32).

A related argument is that government must ensure transport services are

provided on some uneconomic routes to ensure accessibility for more remote or

less densely populated urban areas. The ACT Government stated:

In the case of public transport, the services are often not essentially of a commercial

nature and will not be provided by the private sector unless an appropriate subsidy is

paid, eg. the provision of bus services out of peak hours and on less popular routes. It

may well be that Governments, for social justice and access and equity reasons (eg. the

belief that people without cars should have reasonable access to public transport) will

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run services which do not fully recover costs and will use those sections of the services

which are more efficient to cross subsidise those which are less efficient. (Sub. 167,

p. 14)

The provision of subsidised transport by public operators is not the only way of

achieving social objectives. Indeed, chapter A8 suggests it is a very inefficient

way of helping those in genuine need. Other means are available: directly

funding CSOs (see chapter A5), contracting private operators to supply them,

and requiring private operators to supply a range a specific services throughout

a region.

The roles undertaken by Australia’s governments were outlined in box A4.1. A

number of them are discussed in other chapters. The role of government as:

A8; and

An issue which can figure prominently in defining the role of the operator and

the planner, is the management of infrastructure which is shared throughout the

industry. This includes assets such as roads, interchanges, railway track, and

railway stations.

If operators were to become more commercially oriented, it might be necessary

to relieve them of responsibility for shared (or potentially shared) infrastructure.

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It would be unreasonable to expect them to meet commercial targets while

maintaining infrastructure made freely available to competing operators.

Alternatively, if charges were made for use of the infrastructure, there would be

scope to frustrate competition from other operators. In the case of bus operators

this may mean that the government will need to take responsibility for managing

interchanges and other similar resources. In the case of rail, there is the difficult

question of responsibility for the permanent way (see chapters A7, B1 and B2).

In some cases the logical implication would be the establishment of a separate

authority with responsibility for this shared infrastructure. Such a suggestion

was recently made by the Business Council of Australia’s Transport Task Force

(BCA 1993).

Where service coordination is assessed to be beneficial, government may choose

to:

Several participants shared the view of the People for Public Transport who

commented that:

... the willingness of private operators to link in with other operators (whether public or

private) is open to question. Operators may consider it in their own best interests not to

cooperate with their competitors. This is a major contradiction in the argument for the

privatisation of public transport. (Sub. 58, p. 4)

However, the Commission has found that private operators in many cases do

coordinate with others of their own volition, as their ability to attract custom is

dependent on the total transport service offered to users. For example, the

private bus operators in Toowoomba, Queensland cooperate to provide some

services across the boundaries of their service areas. Similarly, the State

Transport Authority and the taxi industry in Hallett Cove in South Australia

cooperate with a view to providing a seamless service to the user (see chapter

B4).

In the United Kingdom, whilst bus operators have periodical and multi-modal

tickets for use on their own services, most share in area-wide coordinated

ticketing schemes involving several operators and other modes. In Singapore the

co-ordination of services is facilitated by the Public Transport Council but the

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provision of integrated ticketing has been left to the three operators to organise

on their own account.

Hornibrook Bus Services pointed to the incentives which already exist in

Australia for private companies supplying public transport services to

coordinate those services:

... if you set up a system such as, for example, that we operate with Queensland Rail,

we have the incentive to make it work because it’s a commercial situation ... I think that

if it’s structured — a proper co-ordination is structured, the incentive should be there to

the operators, I mean just on commercial grounds ... That’s the incentive. (DR

transcript, p. 404)

Even if government chooses to leave operators with the responsibility to

coordinate their services, government still has a role to play in pro-competitive

regulation to ensure that membership to operators’ cooperatives do not become

a barrier to entering the industry for some operators.

A number of participants agreed with a cooperative form of coordinating body

for Australia’s public transport networks, but some pointed to the need to

involve various levels of government in such a forum. For example, Brisbane

Transport said:

We believe a co-operative effort among local operators, together with local and state

government representation, is a more effective means of ensuring service integration

and coordination (Sub. 239, p. 13).

If government is concerned that operators would not coordinate their services of

their own volition, government may create a ‘compulsory cooperative’ to oblige

all operators to coordinate their services.

Government may choose to make membership to such a coordinating

‘cooperative’ a pre-requisite for a licence to operate public transport services, or

as a condition of a franchise or operating contract where applicable. However

the risk with such an approach is that the government may become too specific

operators meet every train at a particular station when a taxi service may well be

more appropriate.

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In most of the countries examined by the Commission (except the UK) public transport

services are coordinated and ticketing integrated. However the various governments have

undertaken these roles in quite different ways.

services voluntarily. Since bus deregulation, a close working arrangement between bus

operators, the Public Transport Executive (PTE) and the local councils has emerged.

After initial mistrust a spirit of cooperation has developed between the councils and the

bus companies.

A number of governments in continental Europe choose to require their operators to

Tarifverbund (MVV) coordinates public transport services and fares, including

marketing its integrated fare system, in the metropolitan region. MVV is a limited

liability company established by the two major public transport operators: Munich City

and the Deutsche Bahn. It does not operate any services.

Each shareholder holds half of the voting rights in the company and has a power of veto

over decisions of the supervisory board of the Verkehrsverbund. The board is chaired by

the Lord Mayor of Munich and its other members are appointed by the Deutsche Bahn,

the Federal Ministry of Transport, the Bavarian Ministries of Finance and of Transport,

and the regional local governments outside the City of Munich.

Similar associations exist in most of the larger German cities (for example, Frankfurt,

Hannover, Hamburg, and Munich) and in other European cities in Austria, Sweden and

Switzerland.

Council, to regulate public transport. The Council consists of nine government

appointees and the chief executive officers of the four major public transport operators

(two bus companies, the metro operator and the largest taxi co-operative). The Council

coordinates public transport by issuing bus service licences, approving fares and

regulating bus routes. The Council can impose whatever conditions it deems appropriate

on bus service licences, including restrictions on timetables, the number of buses used,

their carrying capacity, stopping points, etc.

itself. It has set up the Toronto Transit Commission, a statutory corporation responsible

for coordinating public transport (except for railways and taxis) in the metropolitan area,

constructing and operating public transport services. The Commissioners are selected by

the metropolitan government from its elected representatives.

Appendix G contains a more detailed description of the urban transport systems in other

countries.

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An alternative may be to require membership to an industry association as a

licence requirement, and to then contract that association to coordinate the urban

public transport network. Munich and Zurich, and Singapore to some extent,

rely upon such associations to coordinate services and integrate ticketing on

behalf of the public transport operators (both publicly and privately owned) who

are members.

This approach may have the benefit of maintaining a network-wide perspective,

but such an association would need the authority to deregister operators who fail

to coordinate services. Such authority would have to be monitored closely by

government.

A third approach to coordinating services is for governments to assume the

coordinating role themselves.

It is often argued that this role precludes the introduction of new operators. This

argument seems to assume that integration and coordination are effective now,

when much of the urban public transport task is performed by public authorities.

However, the Commission heard much criticism from public transport users

throughout Australia; this was no less in cities where urban public transport was

controlled by one provider, such as (until recently) the PTC in Melbourne. The

most common complaints were about timetables being inaccurate or unavailable

deficiencies sole operators are said to overcome. The Commonwealth

Department of Environment, Sport and Territories made some interesting

comments:

There is poor integration between different modes of transport and how they link, both

in terms of timing, frequency and location of interchanges with a resultant failure to

provide integrated, effective useful transport networks ... Various Governments and

Transit Authorities have dictated the intermodal splits and options available for a

community and only in rare cases are these integrated to allow effective intermodal

transfers for commuters. (Sub. 163, p. 12)

And the Victorian Government observed in its initial submission that:

The performance of the PTC and its predecessors over the last ten years casts some

doubt upon the proposition that there are economies in having one organisation

providing a number of different modes ... (Sub. 186, p. 13).

Advances in ticketing technology seem to allow an integrated network

incorporating a number of operators to provide common tickets and still ensure

operators are paid the revenue they have earned. For example, the automated

ticketing system presently being introduced by the PTC will provide the detailed

trip information required on a daily basis.

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Given the current environment of reform in Australia’s urban public transport

governments are considering establishing new agencies responsible for

coordinating the network. The New South Wales Treasury noted:

Corporatising government transport authorities so they can concentrate on supplying

transport services to the market does raise the question of the need for a body to

provide for planning and coordination as well as regulation for system safety (Sub. 177,

p. 11).

Victoria and Western Australia are also moving in this direction. For example,

in Western Australia:

The Department of Transport will assume the role of transport service coordinator ... It

will be responsible for letting tenders for specific services, and ensuring that the

Government’s community service obligation is met, that fare structures are consistent

across the board and that the standard of transport service remains the same. (Media

Statement from the WA Minister for Transport on 14 September 1993)

The Public Transport Users Association pointed to experience in other countries

and stated that:

PTUA neither opposes nor uncritically supports private involvement in providing

public transport services, through ‘contracting out’, or possibly even franchising in

appropriate situations. However, overall control of fares, network structure and

timetabling, must rest with a single, public authority for each urban area. Zurich

provides an excellent example: a public authority coordinates a diverse array of State,

private and municipal operators. (Sub. 96, p. 16)

user benefits in the form of scheduling efficiency, network integrity and

timetabling information accuracy and availability.

Effective coordination does not need to be undertaken by government. Different

types of coordinating bodies are to be found in other countries. While most have

been formed by, or are, public authorities, some have been formed by the

transport operators themselves (see box A4.4). In emphasising the need to

distinguish between coordination and the actual provision of services, the

Victorian Government argued that:

Provided that the most effective mode is allowed to operate each service, and provided

that the least cost supplier within that mode is chosen for the supply of service, central

coordination with multi-firm provision is the best solution (Sub. 186, p. ii).

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Such an agency could coordinate the services of the various operators including

integrated ticketing systems and be responsible for providing passengers with

network and timetable information, and may also be able to ensure provision of

unprofitable services where it can be shown to contribute to patronage of the

overall network.

Whatever functions government performs, they should be fulfilled as efficiently

as possible. The next chapter examines in more detail the issue of GTE reform.

Once the issue of what roles government should perform has been settled, there

is the question of which level of government should be responsible for what

function. This would help to determine whether the current division of urban

transport responsibilities and relationships between the three levels of

government in Australia could be improved.

All three levels of government are presently responsible for the urban transport

roles outlined in box A4.1. A number of participants considered that there is a

need to reconsider the respective roles of each level of government in urban

transport and the relationship between them. The Australian Road Federation

suggested that:

There is some evidence to suggest that both the State and Federal Governments rely on

the existing confused position to avoid their responsibilities to the detriment of all

Australians (Sub. 13, p. 19).

Overlapping responsibilities appear to be a particular problem in roads. For

example, the City of Launceston noted that while it was responsible for

management of local roads including planning, design, construction and

maintenance, State Government agencies are responsible for traffic management

so that State approval is needed for installation of specific traffic facilities such

as median islands, road humps, roundabouts, and traffic signs.

Similarly, the Commonwealth Office of Local Government observed:

Funding responsibilities for the road hierarchy are not always clear; there are some

areas of overlap and omission between the various spheres of government (Sub. 122,

p. 14).

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111

The Office acknowledged that in recent years there has been some

rationalisation of responsibilities. Nevertheless, it said:

A system where the different spheres of government fund different types of roads,

which must be integrated to one road system, has severe implications for the planning

capacity of various bodies. What each body does has ramifications for others. A local

authority cannot successfully plan new urban development unless it is done in coordination

with the funders of the larger connecting roads (that is, State or

Commonwealth agencies) ... a clearer delineation of roles and responsibilities in this

area is urgently required. (Sub. 122, p. 15)

Some participants also cited examples in public transport where multigovernment

involvement had been inefficient.

Several State Governments claimed that some past misplaced investments

occurred because of the availability of tied Commonwealth funds. For example,

the Victorian Government suggested that funds allocated for extensions to the

tram network might have been more productively spent on rehabilitating

existing routes carrying much heavier traffic. And the Western Australian

Government stated:

With the exception of road planning, the relationship with local government is probably

the least effective area of inter- and intra- governmental relations in the transport

planning process, although, in recent times, another degree of uncertainty has been

added through the Commonwealth Government’s involvement in urban issues through

initiatives such as the Better Cities program and Ecologically Sustainable Development.

At the State level, these have been the responsibility of non-planning or transport

agencies, although the Better Cities responsibility has now been taken up by the

Department of Planning and Urban Development. (Sub. 170, p. 4)

Relationships between the government-owned urban transport agencies and

local governments have often been poor. For example, the Western Australian

Municipal Association contended that:

There needs to be greater liaison between Transperth and Local Governments in terms

of both routes and vehicles. It is not unknown for Local Governments to provide

facilities such as bus shelters and find, within a short time, route changes have been

implemented and relocation is required. (Sub. 73, p. 13)

In assessing the respective roles of different levels of government in urban

transport, an important question is the extent to which existing government

jurisdictions match the transport task.

Brisbane and Rockhampton are the only cities in Australia where public

transport is operated and partly financed by a level of government responsible

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for almost the entire metropolitan area. Even in Brisbane, however, there are

problems:

... there are significant institutional problems associated with the provision of

transportation within the region. Transport management is spread between the

Commonwealth, State and Local Governments, and private sectors, with each operating

to different budgets, policies, objectives and geographic boundaries ... Services should

be developed taking account of the travel demand of people rather than restrict services

because of traditional operating borders. (Sub. 173, p. 46)

Significantly, most of the local authorities in other countries the Commission

examined are partly or entirely responsible for meeting the operating deficits on

their public transport systems (see appendix G). Generally, local governments in

Canada, Germany, Switzerland and the United States play roles in the provision

of transport services and infrastructure far in excess of those by most Australian

local governments.

The Consumers’ Transport Council argued that many public transport systems

would be logically organised on a regional basis but that:

The fragmented nature of local government, with varying numbers of councils, within

the one urban region, operates against this. State Governments tend to be preoccupied

with the capital cities. This association would like to see consideration given to some

way of funding public transport on a regional basis. (Sub. 102, p. 4)

Such an approach would accord with that of New Zealand, United States and

Canada, where regional councils or federations of councils take primary

responsibility for the organisation of local transport. In some cases, regional

governments, although not representing the entire metropolitan region, were

able to co-operate to perform and finance these functions with minimal financial

assistance from higher levels of government. The relevant local governments

voluntarily formed a federation. (See appendix G for more details.)

A number of participants saw the benefits of local involvement as more relevant

services, a better appreciation of people’s needs, and greater accountability than

when services are provided by governments at the State or Commonwealth

level. The Western Australian Municipal Association contended that:

Improved intergovernmental relations will also be achieved through increased

regionalisation of public transport services generally ... Local area managers should be

delegated powers to make decisions to improve services at the local level, in

consultation with Local Government and other community interest groups. (Sub. 73,

p. 2)

The Commonwealth Office of Local Government saw an ‘advocacy’ role for

local government as being logical due to its responsibility for land use planning.

The Office quoted Bellarine City Council which stated:

A4 THE ROLE OF GOVERNMENT

113

Local Governments directly witness the local consequences of inadequate and

uncoordinated planning; in their capacity as advocates for their community they can

play a strong and powerful role in conveying to other levels of government the

problems created by inadequate consideration of social needs (Sub. 122, p. 20).

As the National Accessible Transport Committee told the Commission:

There’s certainly no point in not having local government involved because if you have

a bus route somewhere and the bus route drops a person off on an unmade footpath

without any gutter ramps, etcetera, you might as well not have a bus route there. That’s

at the lowest level of co-operation. (DR transcript, p. 425)

Concern for, and management of, the provision of community services is not

new to local government. As the Victorian Community Transport Association

pointed out, local governments are:

... a major HACC [Home And Community Care] service provider and they’re the major

provider that takes on a transport function. So between local areas the provision of

transport to HACC clients is varied greatly, depending on whether the municipality

defines it as a priority. Transport is not earmarked in the HACC budget at all so it is

down at the municipal level that those decisions get made. So some deliver very good

transport services and some don’t. (DR transcript, p. 957)

Local government is well placed to assist with many of the government roles

listed in box A4.1. For example, they could be involved, at least in the planning

stages, in urban infrastructure planning and management, in service

coordination and planning as well as ensuring the transport disadvantaged

(particularly their constituents) have access to urban transport.

As mentioned above, Australia’s system of local government is very

fragmented.

Regional networks cannot sensibly be planned by such a system of local

government, particularly those networks with a large infrastructure component

such as urban rail or guided busways. Also, integrated ticketing and timetabling

may need to be organised on an area-wide basis.

The former Melbourne City Council argued against a direct Council role in

running the public transport system or in maintaining the infrastructure because

it would ‘only add to the existing problems of fragmentation in the transport

system’ (Sub. 182, p. vi). Commenting on the draft report findings, CityRail

stated:

... we would just observe that in a metropolitan situation such as Sydney which,

including Newcastle and Wollongong would have something like 50 or more LGAs

[Local Government Areas], that the very nature of urban rail and the fact that it takes

people between areas means that it would be very difficult, we believe, to plan it from a

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local government perspective. We do see it as a regional if not a state matter. (DR

transcript, p. 554)

The Hobart City Council, too, observed that parochialism and small-mindedness

sometimes stood in the way of desirable transport improvements (for example,

building a cycleway on a disused section of a railway reservation) and argued

that this ‘city is too small to create a huge planning organisation but it is big

enough to need one organisation to oversee transport planning’ (Sub. 168, p. 4).

And the Bus Proprietors’ Association (Vic) had similar views:

Local Government, in its present form is not the best planning medium. It is currently

fragmented to a degree which would produce even more difficulty than presently exists

with service co-ordination. While a regional system of planning may be acceptable in

some areas it is difficult to draw the boundaries in such a way that will not require

some sort of co-ordinating body to oversee the planning function. (Sub. 270, p. 3)

Despite the fragmentation and competing interests of local government, there is

some evidence of moves towards a regional approach towards urban transport.

For example, Queensland’s Regional Planning Advisory Group recommended

the establishment of a Regional Transport Authority to ‘manage, plan and

administer (or where appropriate to have operated on its behalf) all public

transport modes within the region based on the overall regional transport

Strategy for Greater Sydney has been developed ‘to overcome past obstacles to

integration and to arrive at more efficient patterns of settlement supported by a

balanced and viable transport system’ (New South Wales Government 1993b).

As alluded to above, other countries have formed federations of councils to

cover the appropriate region. The Greater Vancouver Regional District (GVRD)

provides an instructive example. The GVRD is a voluntary federation of 18

municipalities, including the City of Vancouver, which undertakes a range of

functions including public transport. Public transport in the Vancouver

metropolitan region is coordinated by a regional transit commission which

decides fares, service levels and the taxes to meet their share of the costs

involved. Locally elected representatives from the municipalities in each region

sit on the commissions.

In the draft report , the Commission stated that ‘urban transport systems are best

planned at the lowest practicable level of government, preferably by local

government’. The ACTU and the Public Transport Unions emphasised the

difference between involving local governments more in the planning stage for

major changes in urban transport, and actually making them responsible for

funding and running public transport.

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115

A number of councils expressed concern that withdrawal of State government

services would leave local government to fill the gap without being provided

with the resources necessary to undertake this function or, as the Local

Government Association of South Australia put it, as ‘provider of last resort’

(Sub. 131, p. 7).

The Commission believes that local government is best placed to contribute to

the efficient incorporation of urban transport services into their local area

through the management and maintenance of bus stops and railway stations and

their accesses, and the advocacy of extensions to services required by their

constituents. However, such extensions of service, if above the minimum

service levels required of commercial operators, ought to be considered a

community service obligation by the commercial public transport provider and

accordingly funded by the local government beneficiary.

The New South Wales Treasury argued that funds for urban transport

investments have been allocated inefficiently because of problems arising from

the process of fiscal equalisation. It claimed that:

The method of Commonwealth revenue allocation to transport projects has a bias

towards capital investment in rural roadworks with little allocation to urban public

transport projects, but this is just a reflection of the greater problems of vertical fiscal

imbalance and the system of horizontal fiscal equalisation (Sub. 177, p. 13).

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The States and Territories are subject to the Commonwealth Grants Commission

(CGC) fiscal equalisation process. The principle of fiscal equalisation is that

each state and territory should be given the capacity to provide the same

standard of public services as the others, if it makes the same effort to raise

revenues from its own sources and conducts its affairs with an average level of

operating efficiency.

Both urban transit and roads maintenance are included in these assessments.

An important issue is whether urban transport should in fact be considered as a

public service. The ACTU and the Public Transport Unions:

... support a strong continuing role for the Commonwealth Government in relation to

the development of urban public transport. ... In particular we hold that it is essential

for the Commonwealth to continue to provide capital funds for urban public transport

upgrading projects, through a successor to the Urban Public Transport program. ... We

contend that the urban transit category should stay part of the Commonwealth Grants

Commission process. (Sub. 271, p. 38)

However, many States are undertaking reforms which entail public transport

authorities adopting a more commercial approach. The South Australian

Government’s view is that all business undertakings should be excluded for

Commonwealth Grants Commission assessments (Sub. 224). The Office of

Transport Policy and Planning of South Australia argued against continuing to

assess States’ disabilities for grant allocation:

... as State Governments increasingly set commercial targets for metropolitan public

transport and the distinction between private and public provision becomes more

questioned. (Sub. 224, p. 14)

The CGC 1993 review of general revenue grants relativities included a review

of the urban transit category. While acknowledging the trend towards

corporatisation and commercialisation, the CGC argued that urban transport

would continue to be funded by government in light of environmental, equity,

and other considerations, and was unlikely ever to be self-financing, and hence

should remain subject to its deliberations. In response to the Commission’s draft

report, the Commonwealth Grants Commission stated that:

... in the Report on Issues in Fiscal Equalisation (1990), the CGC has noted that, mainly

because of perceived public benefits form urban transit services (including relief from

traffic congestion and pollution), all State transport authorities incur net losses on their

operations. Moreover the losses are affected by such factors as urban density, age/sex

composition, input costs etc which differ unavoidably from State to State. It has

therefore concluded that Urban Transit should be included in the assessments and

differential disabilities assessed. (Sub. 203, p. 1)

A4 THE ROLE OF GOVERNMENT

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The CGC did, however, indicate in its 1993 review an intention to assess the

urban transit category by its factor assessment method. This was seen as

avoiding potential inefficiencies arising from the previous modified per capita

difference which could result in states and territories influencing their share of

grants funds through their own policies. The CGC assessed disabilities relative

to the size of the relevant population, urban density, travel by secondary school

children, travel by welfare beneficiaries on concessional terms, input costs,

interest rates, vandalism and security. This essentially meant the larger states

were assessed as bearing a higher cost in providing urban transport services.

These assessments have a substantial impact on state grants. For example,

Victoria and New South Wales each receive over $100 million more in funding

as a result of transport assessments, while Queensland receives about $130

million less.

The Industry Commission has not attempted in this inquiry to undertake a

detailed assessment of the merits of these disability factors. It is concerned,

however, about the potential arbitrariness of the process and, more importantly,

about the incentives to which it might give rise in terms of improving the

efficiency of urban transport provision. But the Industry Commission notes that

the Commonwealth Grants Commission takes care to ensure:

... that the CGC’s methods do not affect the incentives of States to improve the

efficiency of their urban transit services; this is why we [the CGC] apply the factor

assessment method and adopt factor measures which are policy-neutral and allow the

states to retain the full benefits of any efficiency improvements ... (Sub. 203, p. 1).

commercialisation of Australia’s urban transport agencies. However, the

Commission accepts that such an assessment would need to take place in the

context of a broader review of CGC processes.

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119

Most urban transport infrastructure and most public transport services in

Australia are provided by state, territory, and local governments. It is critical

that they do so efficiently. This chapter is about improving the performance of

government transport agencies, focussing on the relationship between them and

their owner governments. Fundamental changes to the regulatory and

competitive environment in which these agencies operate are considered in the

following chapter.

The agencies which provide urban transport infrastructure and public transport

services operate under varying arrangements. A consistent feature is the strong

control governments exert on their operations. This control affects their fares

and charges, services and how they are provided, investments, funding and

The organisational form of agencies providing public transport services varies

from statutory corporation to department of state. Their responsibilities

currently range from providing bus or rail services only, to providing public

transport services with up to three modes, coordinating service across the

system and regulating private operators.

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Statutory Authority CityRail is a division of

the State Rail Authority

(a Statutory Authority)

Corporation Statutory Authority

(moving towards

corporatisation in July

1995)

Department of the

Brisbane City

Council

Statutory Authority

Board. Members

appointed by

government

Board. Members

appointed by

government

Board. Members

appointed by

government

Board. Members

appointed by

government

General Manager of

Transport reports to

the City Council

Board. Members

appointed by

government

Operating deficit.

Some CSO funding

by State

Government

Operating deficit.

Some CSO funding by

State Government

Operating deficit Operating deficit Subsidy payments

by Brisbane City

Council and State

Government

Operating deficit.

Some social welfare

payments by State

Government

Fare setting Recommendation

by STA, review by

NSW Pricing

Tribunal and

determination by

State Government

Recommendation by

SRA, review by NSW

Pricing Tribunal and

determination by State

Government

Recommendation

by PTC and

determination by

State Government

Recommendation by

Queensland Rail and

determination by

State Government

Recommendation by

Brisbane Transport

and the Brisbane

City Council, with

determination by

State Government

Recommendation by

the MTT and

determination by

State Government

$1 million $1 million Varies with project $500 000 Varies with project $150 000

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Table A5.1 cont/d:

Corporate structure Statutory Authority Statutory Authority Division of Department of

Urban Services

Division of Department of

Transport and Works

Executive structure Board. Members appointed

by government

Board. Members appointed

by government

Chief executive responsible

to Secretary of Department

Operations manager

responsible to Secretary of

Department

Funding of CSOs Operating deficit. Some CSO

funding by State Government

Operating deficit Operating deficit Operating deficit

Fare setting STA recommendation and

determination by State

Government

MTT recommendation and

determination by State

Government

ACT Government NT Government

$500 000 Varies with project Varies with project $250 000

Sources: Submissions, annual reports and correspondence

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These agencies are government trading enterprises (GTEs) because they

Governments also play a major role in the provision and maintenance of urban

roads. The principal organisations responsible for building and maintaining

urban roads are the state and territory road agencies and local governments (see

box A5.1). These bodies either undertake these functions themselves, or oversee

the private contractors who do.

New South Wales Roads and Traffic Authority

Victoria Roads Corporation of Victoria

Queensland Department of Transport

South Australia Department of Road Transport

Western Australia Department of Main Roads

Tasmania Department of Roads and Transport

Australian Capital Territory Department of Urban Services

Northern Territory Department of Transport and Works

Throughout Australia Local governments

The state and territory road agencies are not GTEs because they receive virtually

no income from their services. They are funded by Commonwealth, State and

Local Governments. The Australian Road Federation describes their role thus:

... a public road authority decides what is to be done, has plans and specifications

prepared and arranges for the work to proceed. The private sector may be involved in

the design as a consultant and in the site work as a contractor or subcontractor. The

appropriate mix of public and private sector participation depends upon circumstances,

the aim being to make use to the extent practicable of the best aspects of each sector.

(Sub. 13, p. 44)

It has become clear in this inquiry that there is scope to improve the

performance of state road agencies (see chapter A3). Several participants

pointed out that reform in road agencies is lagging behind public transport

GTEs.

mainly engaged in the production of goods and services for sale in the market with the

intention of substantially covering their costs, whether they be incorporated under

company or other special statutes or unincorporated units. The source of this definition is

ABS 1990b.

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Whatever the functions of a government transport agency, the institutional

framework in which it is placed and the requirements imposed on it by

government can influence whether it can and does operate efficiently.

Information available to this inquiry highlights several shortcomings in the

present institutional arrangements.

First, the objectives given to agencies by government have often been unclear or

so broad as to defy precise definition or measurement. In the words of the New

South Wales Department of Transport:

The efficiency of transport services has, over the years, been affected by the fact that

the authorities were unclear as to whether they should be performing a commercial

transport task or providing various social and other concessions (Sub. 178, p. 19).

The Tasmanian Department of Roads and Transport (1992) has a mission

statement which requires it to: ‘encourage and conduct a safe, reliable and

efficient road and transport system for the benefit of the Tasmanian community

... to promote the concepts of social justice in transport’.

Second, intervention in day-to-day decision making has been common, blurring

performance measurement and accountability. The Australian Tramways and

Motor Omnibus Employees’ Association (Brisbane Branch) claimed:

Public transport is funded both directly by the user and by the government. Over the

years public funding of transport has been done for political as well as social reasons.

(Sub. 32, p. 3)

In addition, a former Chief Executive of the Victorian PTC has said:

I don’t take great pride in the unions running a book on how quickly they can overturn a

management decision by going through the front, back, or side door of government

(Starrs 1994 forthcoming).

Third, the lines of responsibility and accountability have often been confused.

The Victorian Commission of Audit commented in respect of the PTC:

Accountability for results has always rested ultimately with the Minister. Policy

affecting service levels, line extensions or closures, freight rates and passenger fares

has always required approval at that level. The policies adopted have often gone against

commercial principles, although the Transport Act provides that the PTC may have

specific formal instructions from the Minister printed in the Government Gazette. This

is rarely done. (Victorian Commission of Audit 1993, p. 139)

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Transport Act 1990, public and private transport operators in NSW are treated as equal

commercial bodies in contract tenders. The STA has recently been divided into business

units along geographic lines. CityRail has divided its operations into three broad regions

with line managers for specific sections.

been passed. Corporatisation of the Public Transport Corporation (PTC) is proceeding,

including establishment of an accountable board to run the PTC along commercial lines

‘to separate regulatory and operational functions and to give the service delivery

organisations a clear and more commercial charter’ (Sub. 319, p. 1).

Queensland: Queensland Rail (including Citytrain) is to be corporatised by June 1995

reorganised ‘with major core businesses allowing clear lines of responsibility and

accountability’ (Sub. 327, p. 6). Brisbane Transport has no plans to corporatise its

activities: it contends that efficiency can be maintained through ‘competitive tendering,

setting of minimum service standards, consistent subsidy structures, CSO determination

on a service-by-service basis, and setting of performance standards to be met or

exceeded’ (Sub. 239, p. 15).

Western Australia: The Western Australian Government has announced plans to

corporatise Metropolitan Transport Trust (Perth) over three years and open it

progressively to competition from private and public operators of buses, trains and

ferries.

Transport Bill which provides for the creation of a new Passenger Transport Board

responsible for contracting, licensing and promoting passenger transport services; and

abolition of the STA Board. The STA would become a publicly owned agency (Transit

Adelaide) responsible for delivering services through negotiated and tendered contracts

with the new Board.

Tasmania: The Tasmanian Metropolitan Transport Trust (Metro) is a trading enterprise

Tasmanian Government is in the process of corporatising ‘Metro’.

Australian Capital Territory: ACTION’s full operating costs have been identified and

separated from other government programs. However, the ACT Government ‘does not

believe that corporatisation of ACTION is the most appropriate model’ to achieve

‘maximum accountability and efficiency of service provision’ (Sub. 228, p. 9).

Sources: Various submissions and annual reports.

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Experiences like this are not confined to Victoria. The Metropolitan Transport

Trust of Tasmania stated that:

Until recent years, most publicly owned transport systems made inappropriate

investment decisions due to the imposition by government of inflexible and politically

driven policies (Sub. 148, p. 35).

Fourth, management of transport agencies is constrained in making operational

decisions. Examples are the control by government of fares (both their structure

and levels), services provided (routes, frequencies and vehicle standards),

investment and employment decisions.

The shortcomings outlined above are widely acknowledged across Australia and

the process of corporatising their urban transport GTEs (see box A5.2).

conveniently grouped under three headings:

While elements of the corporatisation approach should also apply to the road

agencies, the absence of direct road pricing (at least in the short to medium

term) limits the degree to which commercial objectives can be pursued.

There is scope, however, to improve the way road agencies work internally by

forming semi-autonomous units, evaluating managers on performance and, if

appropriate, using rewards to encourage improvements. Road agencies should

allocate all maintenance and road building works through a competitive

new construction and approximately 70 per cent of ACT road maintenance to

the private sector. And the Commission is encouraged by the Victorian

Government’s recent moves to restructure the Victorian Roads Corporation:

and road use management, road safety, and registration and licensing. Services will be

URBAN TRANSPORT

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delivered on a more competitive basis through the regional network, with an increased

emphasis on contracting out including the progressive outsourcing of road maintenance.

Input services such as road and traffic design, information technology, etc. are in the

process of being either outsourced where this is shown to be efficient, or provided

internally on a commercial basis. (Sub. 319, p. 9)

For an urban transport agency to perform effectively as a GTE, it needs to be

given objectives by government which are clear and capable of practical

implementation. If objectives conflict, GTE management will need to assess

which objectives to pursue with higher priority than others; and managers could

implement policies which contradict their owner-government’s wishes.

Governments and their GTEs need a mutual understanding of the objectives to

be pursued. This can be achieved through the corporate planning process (see

below).

It is essential to separate quite clearly a GTE’s commercial objectives – the

efficient performance of the commercial transport task – from any social

objectives which the government may wish to pursue. As the NSW Treasury

said:

Some barriers to improved economic efficiency come about because governments in the

past have required the transport authorities to pursue a range of social policy objectives

which were essentially of a non-commercial nature. Community service obligations ...

impose substantial costs and to address this problem it is necessary to separate the

commercial and non-commercial activities of transport authorities. (Sub. 177, p. 9)

All state and territory governments require their urban transport agencies to

satisfy various community service obligations (CSOs) – see chapter A8. The

management of CSOs is therefore crucial if they are to be delivered effectively

and at least cost to the community. The Australian City Transit Association

commented that:

Identification and costing of Community Service Obligations (CSOs) loom as an

essential component of any funding scenario which seeks to place transit agencies on a

commercial footing. In Australia, for example, it is not uncommon for operators to

carry two thirds of total patronage as concession holders and for extensive networks of

poorly patronised off peak services to be maintained in the general community interest.

It should be emphasised that public sector transit agencies are generally required to

undertake a significant range of CSO activities and this in turn impacts on relative cost

comparisons with the private sector. (Sub. 174, p. 7)

The Commission considers that the social objectives behind individual CSOs

should be clearly identified and their cost measured. These are not simple

A5 REFORMING GOVERNMENT TRANSPORT AGENCIES

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matters, but they are starting to be addressed by governments across the

more economic and financial management information than that required for

performance monitoring and good GTE management practices.

Governments also need to consider whether their CSOs are soundly based. As

discussed in chapter A8, there are indications that many of them are missing the

mark and not assisting the transport disadvantaged as well as intended. A

judgement should be made on a case-by-case basis as to whether the benefits of

the social objective pursued exceed the economic costs. Direct government

funding of CSOs provides an appropriate discipline on governments for this to

be done.

Part and parcel of giving a GTE clear commercial objectives is, of course, the

appointment of board members solely on the basis of their experience,

knowledge and skills relevant to those objectives. This does not rule out people

from transport user or union backgrounds being appointed to the board – but

they would be there because of their skills and expertise, rather than to represent

particular interest groups.

The situation in Western Australia, for example, is unfortunate in this respect.

Minister to be satisfied that board members have wide experience and capacity

in transport, industrial, commercial or financial matters, it specifically requires

the appointment of one person nominated by the Trade and Labour Council of

Western Australia and one person who is a user. The ACTU and Public

Transport Unions argued that such a requirement is ‘crucial’, given that ‘board

members are nevertheless appointed in an individual capacity and subject to the

usual confidentiality requirements’ (Sub. 271, p. 40).

A further issue is the desirability of separating the regulatory task from the

commercial functions of a GTE. That does not mean the government cannot be

involved in both. But conflicts of interest may arise, or appear to arise, if the

Enterprises has commissioned a paper on some definitional, costing and funding issues

associated with CSOs and is expected to be released in 1994. The paper is intended to

encourage a more consistent approach to the treatment of CSOs by governments. The

NSW Treasury has prepared a policy paper entitled ‘A CSO Policy for NSW GTEs’. The

Commission has addressed the CSO issue in a number of recent inquiries into the activities

of GTEs, for example, in its Report on Mail, Courier and Parcel Services (IC 1992)

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same agency is responsible for setting standards or policing safety and

environmental matters for activities it engages in. For example, safety and

service standards regulation might not be pursued solely in accord with their

objectives, if their interpretation could increase a GTE’s revenue.

To avoid such conflict, or the suspicion of conflict, to increase transparency and

accountability, and to enhance the efficient delivery of both functions, the

Commission considers that regulatory activity should be separated from the

provision of services.

This is recognised in NSW, for example, whose Department of Transport

Regulatory functions, such as safety regulation, have been transferred to the

Department of Transport to ensure that a regulatory role does not conflict with a

commercial role (Sub. 178, p. 2).

For similar reasons the task of ensuring that public transport services are

coordinated, as well as the franchising and contracting out functions, should be

the responsibility of a separate agency from the service provider. The Victorian

Government commented on problems it has witnessed when one organisation is

responsible for both:

The PTC’s role in Melbourne is to organise scheduled public transport, and to manage

the rail, tram and bus operations which it owns. This can create conflicts of interest. At

one time, the Metropolitan Transit Authority was both deciding the conditions under

which private bus contractors should operate, and buying their businesses. At the same

time, its own comparable bus operations were less efficient than the contract

operations, and the purchased bus lines were made less efficient in the Met’s hands by

the substitution of its own lesser standards of efficiency. ... The problem with one

organisation which is both operator of some modes and manager of subsidies for others,

as has been seen in Melbourne in the recent past, is the temptation to protect the owned

and operated modes (trains, trams, buses) from the competition of more efficient

contractors. (Sub. 186, pp. 13, 14)

The Bus Proprietors’ Association (Vic) welcomed the separation of these

functions:

The separation of regulation and service delivery is a key concept and it is pleasing to

see the Commission’s strong recommendation for such action. Without separation of

these powers it is extremely difficult to achieve objective planning of the overall

transport system without compromising co-ordination of modes or best utilisation of

infrastructure and assets. (Sub. 270, p. 1)

If a GTE is to be accountable to the parliament through the relevant minister(s),

as it should be, its owner government needs to take certain steps to make this

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possible. The accountability requirements may be set down in legislation, with

the main mechanism being the annual report and associated financial

statements. The GTE should be subject to external audit.

A corporate plan needs to be prepared regularly by the board and approved by

the relevant Minister(s). The annual report provides a vehicle for the GTE to

report the strategies and policies it is pursuing in fulfilling the requirements of

the corporate plan. It should also cover certain financial matters, including an

assessment of the GTE’s performance relative to the financial targets contained

in the corporate plan, and the cost of fulfilling its community service

obligations.

The overall performance of GTEs is not reflected in a share price, so other

methods must be used. For example, average target rates of return on assets or

equity are standard private sector

measures of performance, and are

increasingly used in the public

sector. They are appropriate for

GTEs such as public transport

agencies.

Some data are already collected, for

example, by the Australian City

Transit Association to allow its

members to derive a comprehensive

and comparative set of statistics and

performance indicators.

The Steering Committee on National

Performance Monitoring of

Government Trading Enterprises has

also begun to collect data for a

consistent set of performance

number of participants criticised the

performance indicators shown in the

draft report for the lack of measures

showing quality of service from a

user’s perspective. Brisbane

Transport noted:

A very narrow selection of performance indicators for public transport authorities is

outlined in Box A5.3. Under non-financial indicators, surely service quality assessment

(customer expectation and satisfaction ratings) ranks of high importance. (Sub. 239,

p. 16)

return on assets

return on equity

operating cost per vehicle kilometre

operating cost per boarding

cost recovery

average fare per boarding

expenditure per boarding

revenue per employee

boardings per kilometre operated

service delays

service cancellations

kilometres per vehicle

employees per vehicle

* These and other indicators are being used by

the Steering Committee on National

Performance Monitoring of GTEs

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The Steering Committee is working to improve the reporting of service quality

indicators. Likewise, Austroads is formulating a group of projects on

performance measurement which aim to provide consistent performance

indicators for road authorities (see chapter A3).

The Commission considers that, once clear commercial objectives have been

given to a GTE and accountability arrangements have been well established,

efficiency is enhanced if Government and ministerial oversight is removed as

far as possible from the day-to-day operations of the GTE. This supports a

statutory corporation, separate from the departmental structure of government.

Local, State and Territory Governments should remain at arm’s length from the

day-to-day activities of their agencies so that the performance of the board and

management can be clearly assessed. As owners, governments could still set

limits to investment and the range of activities undertaken. But if governments

want to issue directions on the conduct of an agency’s day-to-day operations,

they should be in writing and tabled in parliament. A board should not be

required or expected to seek ad hoc ministerial approval for individual activities

within its prescribed responsibilities, but ought to produce regular operating and

corporate plans; and get government approval of the latter.

Brisbane Transport saw this requirement as limiting the ability of its

government-owner to influence the level of service provided to ratepayers:

There are some hidden advantages or even overt advantages in having local government

politicians have a hands-on approach to performing the service, to establishing a level

of service that’s appropriate for the community. That is not an opportunity if you

corporatise. (DR transcript, p. 379)

A corporatised public transport GTE can still be instructed to extend particular

services by government. However, such instructions should be made formally

and publicly.

Day-to-day operating autonomy means an agency having the freedom, for

example, to contract out activities where it finds that cost-effective. In a similar

vein, autonomy in day-to-day operations should mean the GTE having the

freedom to determine the terms and conditions of employment, not being

subject to constraints of government employment policies and practices (see

chapter A3).

At the same time, urban transport GTEs should not be advantaged compared

with private enterprise merely because they are government-owned. This has

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implications in particular for taxation, borrowings and competition. They should

be liable for the full range of Commonwealth, State and Local government taxes

and charges, or required to make an equivalent contribution to State and

Territory revenues. These taxes and charges (or their equivalents) need to be

paid to ensure the efficient allocation of resources, including capital, among the

various activities in which they can be used, be those activities in the public or

the private sector.

Likewise, urban transport GTEs should be made subject to the Trade Practices

Act and no longer be excluded from the coverage of the Prices Surveillance Act.

The Commission supports the approach taken in the recent (Hilmer) Report on

National Competition Policy (Independent Committee of Inquiry 1993) which

allows for the operation of state-specific regulators, such as the NSW Pricing

Tribunal, within a national framework.

The Commission concludes that the efficiency of urban transport agencies

throughout Australia would be enhanced if, as far as possible consistent with

their functions, they were exposed to the same incentives, rules and regulations

as private enterprise. This means placing them in a ‘corporate’ environment.

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The Commission appreciates that several State Governments have already

started the process of corporatising their urban transport GTEs (see box A5.2).

That is welcome. Other governments, State, Territory and (where applicable)

Local, should commence the process immediately. The matter becomes all the

more urgent when considered in the context of the more competitive

environment for urban transport which is proposed in the next chapter.

The Commission acknowledges that in the absence of direct road pricing, road

agencies will not be appropriate candidates for corporatisation. However, as

noted earlier in this chapter, there is scope to organise them more efficiently.

133

This chapter examines whether changes to the relationship between government,

operators, and users might lead to more efficient urban transport systems,

delivering better services to users at lower cost while still enabling broader

government objectives (such as equity) to be met. As the South Australian

Government stated:

The key institutional issues in urban transport surround the structure of the relationship

between Governments, the private sector and users. No aspect of urban transport exists

in a completely free market: taxis are regulated; buses are subsidised; roads are

provided ‘free’ by taxpayers. Clearly, government regulation of private services and

government provision of services are the two major areas of intervention. It is also clear

that economic principles are not consistently applied to these interventions: the costs of

regulation are rarely recognised in decision-making; publicly provided services are in

many cases not provided efficiently, and subsidies are not transparent. (Sub. 144, p. 16)

While administrative reform of government transport authorities (discussed in

the previous chapter) will secure large gains, it will still leave in place the host

of regulations which prevent competition from making urban transport systems

as efficient as they could and should be. Key questions are whether we need

more fundamental changes to promote efficiency through competition, and how

they might be implemented.

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long history.

Urban passenger rail services in Australia are provided exclusively by

government organisations, in most cases (Sydney, Melbourne and Brisbane) by

a division of the statutory authority responsible for freight and country

passenger services. Adelaide’s urban rail services are part of an integrated

metropolitan transport authority, and Perth is a contractual arrangement between

Transperth and Westrail. All urban railways are subject to government direction

and control (details of the regulatory environment for urban rail are at chapter

Where buses services are not operated directly by government, they are

provided by private operators licensed by, or under contract to, government (see

chapter B3). These arrangements confer virtually exclusive operating rights to a

private operator on a route or within a geographical area. In all cases

government controls the fares charged, routes operated and frequency of

service.

Taxis were originally regulated by local governments, partly to control street

and kerbside activity by taxis, particularly in city centres. In some regional

cities, councils are still the licensing body. In all capital cities, taxis are

controlled by State bodies regulating entry, fares, vehicle standards, operating

practices (for example, restrictions on touting) and sometimes even vehicle

colour (see chapter B4).

There is a role for government to modify market outcomes which are seen as

unsatisfactory; regulation is but one means of achieving such modification.

Concerns may relate to issues such as abuse of market power, public safety, or

environmental effects, and the achievement of social objectives (see chapter

A4).

Regulation in its broadest sense includes economic regulation (restrictions on

entry into an industry), but also encompasses restrictions on competition

resulting from direct government provision, particularly when provision of

subsidies effectively nullifies the potential for alternative suppliers to compete,

even where there are no legislative barriers to entry.

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It is important to recognise that regulation can impose costs which adversely

affect consumers, taxpayers, and suppliers (see box A6.1). In particular,

regulations which have the effect, intended or otherwise, of restricting

competition, may give rise to inefficiencies in urban transport services. The

focus of this chapter is whether there are better ways of meeting the objectives

which regulation seeks to achieve.

equates to about $2 a ride on average (see chapter B4);

$320 000 to buy a taxi licence (see chapter B4);

are made in the capital cities (see chapter B3);

passengers they carry (see chapter B3);

surreptitiously, even though there is no bus service in the area (see chapter B5);

destinations and times of services as governments either directly make decisions

or regulate these aspects of operation (see chapter B1); and

competing on the same route.

Regulation can restrict the development of transport services which are

responsive to market demands by protecting existing operators and their

services from competition. The inability of alternative suppliers to enter the

market provides an environment in which inefficiencies in management and

work practices can flourish (see chapter A3), and which restricts innovation.

Inevitably, regulation of entry leads to higher operating costs which have to be

passed on to consumers in higher fares or to taxpayers.

One effect of government regulation of the taxi industry, for example, is the

high values attaching to taxi licences because of the restrictions on taxi

numbers, about $2.5 billion in 1993. While the sale of taxi plates represents a

source of easy revenue for State and Territory Governments, it inevitably results

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in higher prices to consumers. The general impacts of taxi regulation were

described by the ACT Government as follows:

While regulations currently in place provide the existing taxi industry with a guaranteed

market, the restrictions on entry also have the effect of pushing up the value of taxi

licences. These values will reflect the guaranteed returns expected from operating

within a protected market and may work to the detriment of consumers as the high cost

of obtaining licences will inevitably be passed on. Furthermore, the restrictions on entry

to the industry protect existing operators from competitive conditions which might

otherwise further reduce costs. More open entry arrangements may also enhance the

flexibility of the service. (Sub. 167, pp. 32-33)

Regulation may result in some users being charged higher prices to pay for the

provision of services to others. For example, if an exclusive franchise is granted

to an operator subject to providing certain unprofitable services without subsidy,

the inevitable result is over-charging on the commercial routes. Such overcharging

discourages worthwhile travel which would otherwise be undertaken.

Regulation may also have questionable equity effects: why should people pay

for subsidised services for others simply because they travel in the same

geographic area? Such social policy goals are arguably more appropriately

funded out of general taxation.

A number of participants considered that existing regulation was hindering the

development of transport services which met changing travel demands. The

Victorian Bus Proprietors Association argued that:

... there should be regulation of public transport, but limited to those areas of public

safety, public interest and consumer protection which are considered necessary ... The

current control imposed on the bus industry in Victoria is considered to be excessive,

particularly in contracted route service operations. While the regulation is reasonably

appropriate, contractual controls have destroyed the industry’s ability to innovate and

operate as efficiently and effectively as a truly private enterprise system. (Sub. 84, p. 4)

Mr Cotgrove added:

Across the spectrum of society, the old rigid, regulated, conformist, centralised

structures of the industrial age are giving way to new flexible, deregulated, pluralistic,

the past, to work, to shop, to school and to conduct personal business, are being

lifestyles. Journeys to entertainment, recreation, and leisure are becoming

more important relative to journeys to work, shop, and school. As a result, the

centralised, operator-controlled, fixed-route, fixed-time inflexible systems of the

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industrial-age public transport era are becoming less able to cope with the dynamic,

flexible, and discretionary travel demands of post-industrial society. (Sub. 160, p. 7)

Similarly, Mr Glazebrook claimed that too much regulation and the provision of

guaranteed subsidies had limited the industry’s imagination and capacity to

invest in new technology:

To all intents and purposes, trains and buses are much the same as they were three

decades ago, with little or no increase in speed, and only some improvement in

reliability and comfort. More importantly, there has been almost no attempt to

no strategic marketing, very few genuinely new products or services developed, and

extremely slow adoption of new technology, particularly in the information area. This

can be seen from a comparison with other industry sectors such as Freight Transport,

the Banks, the Airlines, the Travel Industry, the Hospitality Industry and even the Post

Office. (Sub. 146, pp. 8-9)

In its initial submission to this inquiry, the Western Australian Government

acknowledged that government regulation of buses restricted innovation, such

as the use of minibuses and the growth of community transport services.

At present, there are restrictions on the extent to which different modes of urban

transport are allowed to compete with each other. For example, buses are often

required to act as feeders to trains and are prevented from competing on the

same route. The choice of mode is often dictated not by what people want or

need, but by what regulation allows. Where a single public transport authority

controls all modes, there is a tendency to limit the extent to which different

modes compete.

One outcome of this regulation is the assignment of a particular task to a more

costly mode of transport. Appendix D suggests there is not an optimal division

of the urban transport task between different modes in either Adelaide or Perth

(see box A6.2). Unit operating costs per passenger journey are typically much

higher for heavy rail than either trams or buses. For example, according to the

Steering Committee on GTE Monitoring, in Melbourne in 1991-92, expenditure

per passenger boarding for rail was $3.41, compared with $1.94 for trams, and

$2.76 for buses. In Adelaide, corresponding figures were $7.42, $3.47 and $2.38

respectively.

These comparisons need to be qualified by the fact that average journey length

is typically much longer for rail than for other modes, and Melbourne buses are

not allowed to compete with trams on the more highly patronised inner-city

routes. In addition, the figures do not incorporate estimates of any external costs

(for example, pollution), although they do put at least an implicit value on them.

For example, the Victorian Government noted that, after subtracting the cost of

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unnecessary conductors, operating Melbourne’s present tram service costs

approximately $45 million more a year than if buses were used. It commented

that taxpayers pay heavily for its residents’ preference for tram travel and the

apparent environmental advantages of trams.

Appendix D finds that in Adelaide, Melbourne and Perth buses have lower costs of service per passenger-kilometre and seat-kilometre than rail, trams or ferries. It also concludes that in these cities:

Regulation may have the effect of restricting the travel options available to

potential travellers by preventing relevant services being offered. This may

impact particularly harshly on those with limited transport options (see chapter

A9). The Community Transport Organisation (CTO), for example, said of the

NSW Passenger Transport Act:

While the legislation makes it plain that operators under commercial contracts have

exclusive rights only to regular route public passenger services the Department of

Transport has made it clear to the CTO that they consider that exclusivity to cover all

public passenger services. The CTO feel that this interpretation is a major backward

step as it will serve only to discourage or prevent the development and establishment of

new innovative services by operators other than the contract holders. We are of the

strong belief that there are many more benefits to be had by deregulating the public

transport industry than are to be gained by the establishment of private monopolies, a

major consequence of ... the Passenger Transport Act. (Sub. 28, p. 12)

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