Transcript—Radio National breakfast with Fran Kelly

Interview

PFI033/2016

24 November 2016

Topics: Turnbull Government response to IA 15-year plan

Fran Kelly: Paul Fletcher is the Minister for Major Projects, and he joins us in our Parliament House Studios. Minister, welcome to Breakfast.

Paul Fletcher: Thanks Fran, good to be with you.

Fran Kelly: So why is the Government considering this, or reviewing this, dropping the fuel excise and replacing it with a road user charge? What would be the rationale behind a shift like this?

Paul Fletcher: Well what we’re doing today is announcing the Government’s response to the Infrastructure Australia 15 Year Plan. So Infrastructure Australia is the Government’s specialised independent advisor on infrastructure. They brought forward a plan earlier this year, with some 78 recommendations. Now one of those was to have a public inquiry into our present system of how we fund roads and how we pay for roads. Many people today don’t realise that they do pay quite a lot to use our roads through registration charges, and also through the fuel excise system, where you pay almost 40 cents a litre. And according to models - for example done by the AAA, the automobile peak body - Australians can be, in some cases, spending $50 a week through fuel excise and registration, to use our road system.

So what Infrastructure Australia has suggested is that we ought to hold public inquiry to look at our present system, and how it operates; whether it’s fair. One of the issues is that as vehicles become more fuel efficient; what that means is if you’re driving, say a 10-year-old Commodore, you’re paying through the fuel excise system, the equivalent of about 4.5 cents a kilometre. If you’re driving a Prius it’s about 1.5 cents a kilometre. If you’re driving in a completely electric Tesla, you’re not paying anything through the fuel excise system. So one of the issues is fairness, and so one of the aims of this study will be to have a very thorough look at our current system; how it works. But it will also look at issues like the role of councils. We’ve got 880,000 kilometres of roads in Australia, many of them maintained by councils who are in significant cases under some pressure. We also have the issue of how much we spend on maintenance, versus how much we spend on new projects.

Fran Kelly: Okay, so it’s about maintenance of our road networks, as well as where new roads need to be built. But – I mean a review is a good idea obviously, because there can be unexpected snags with these things, just as you mentioned there. Someone in a gas guzzling 10-year-old car, is paying a lot more in taxes than someone with –well let’s call it a clean car, either a hybrid or an electric car. But you want to make sure, too you don’t, in this shift, then take away any incentive for people shifting to cleaner cars, because we want cleaner car stock don’t we - for the environment?

Paul Fletcher: There’s a whole range of factors to look at and one of the other factors is that our road funding system involves both the Commonwealth and the states. So certainly with this review, the states will be involved. I want to emphasise what we’re committing to today is a study into these issues. If there were to be any changes in this direction, that’s a ten to 15 year journey.

Fran Kelly: Sure, but this idea’s come up before, the Henry Tax Committee had a notion around this. And I think it was regarded as a little bit too hot to handle then, and that’s because a change like this will have winners and it will have losers. Can you say that if every passenger and every person on the road whether they’re paying a road user charge rather than a tax excise, whether that will mean most motorists are likely to end up paying more to drive their cars or less? Can we say that yet?

Paul Fletcher: Fran I don’t think we know the answers to those questions. If there were to be any change, it would require both the Commonwealth and the state governments to agree. So what we’re committing to do today simply is to have a study led by an eminent Australian – and we’ll be announcing more in due course about who that is and the terms of reference and so on. It’s really about having a thorough look at this issue, because as you say, a whole lot of reviews – the Henry review, the Harper review into competition which reported last year, the Productivity Commission Inquiry into Public Infrastructure – have recommended looking at this direction. So too bodies like the Australian Trucking Association have suggested a change to the way that we presently charge heavy vehicles – those at 4.5 tonnes and above, about 3 per cent of the fleet.

Fran Kelly: They want to pay less presumably?

Paul Fletcher: Well there’s a rudimentary user charging system now, but they want some changes to that. And as I’ve mentioned, the Australian Automobile Association – which is the peak body for the motoring clubs – has called for a comprehensive look at this. So what we’re going to do is have a look at it. Certainly we need to have a detailed look at it. But there won’t be any change here unless governments – and I do emphasis both Commonwealth and state and territory governments – are persuaded that the outcome would be a system that was fairer, that produced better roads that helped people get around more easily, that reduced congestion. So we need to have a look at our current system, understand how it works, improve public awareness of how it works because as I say the majority of people either don’t know they’re paying a fuel excise or don’t know what the rate is.

But the key test is whether you could deliver a better outcome. And that’s really what all of the recommendations of these 78 recommendations looking at a whole range of infrastructure issues in Australia- Infrastructure Australia’s 15 Year Plan have directed at. We’re accepting the majority of the recommendations. There are also things like working with state governments to develop urban rail plans for our five largest cities and developing a data collection and dissemination plan to improve the collection of data across the infrastructure sector.

Fran Kelly: Okay. I want to come back to rail, but just briefly, I mean presumably - perhaps this is a case too of technology catching up with the ideas of the Henry Tax Committee and others – which were a long time ago now – because we have GPS tracking, it’s so efficient we can actually easily work out where cars are on the road and when and that allows this to happen. But it is about better funding models too. And of the $15 billion collected every year from fuel excise, according to the motoring organisations, less than half of that is returned to building or maintaining roads. If there was a road user charge would every dollar be spent on roads?

Paul Fletcher: Certainly one of the arguments that is made here is that if you had a more direct user charging system, there’d be a more direct connection between what people pay to use roads and then how that money gets spent. And also that it would more directly reflect where people are travelling; so that decisions about which roads get upgraded, where new investments were made, would be more directly responsive to travel patterns.

Fran Kelly: And also travel patterns might change because of costs so people might change then that would help with congestion?

Paul Fletcher: Well these are all questions that we need to understand better. I think the honest answer is we don’t know the answer in practical terms yet. There’s a lot of theory around this. What we want to do is have a very comprehensive study that starts with really explaining to Australians how the present system works, what some of its strengths are, what some of its weaknesses are; and then looking at whether there would be ways of delivering better roads, a fairer system, reduced congestion. These are all things that we would need to be satisfied of if there were to be any change and certainly any change is going to be a 10 to 15-year journey. But what we are announcing today is a significant study that will be led by an eminent Australian that will look into the potential benefits and impacts of road user charging. That’s one of several key responses that we’ll be announcing today to Infrastructure Australia’s 15 Year Plan. As I mentioned, also we’ll be looking at a national freight and supply chain strategy to understand how freight moves around the country. So a whole range of issues in infrastructure.

Fran Kelly: I know I said I’d get to rail but we are out of time, so we might have to do that another time. But importantly the key headliner here is developing urban rail plans for our five big cities, so we’ll hear more about that I’m sure.

Minister, thank you very much for joining us.

Paul Fletcher: Thanks Fran.

Fran Kelly: Paul Fletcher is the Minister for Major Projects.