By Justin Di Giulio
CityLink Source: G&G Engineering
The tolling systems in Victoria and New South Wales (NSW) are emblematic of the broader challenges that arise when public infrastructure is intertwined with private investment. As Australia’s most populous states, both have heavily relied on toll roads to manage congestion and fund large-scale infrastructure projects. However, the current state of tolling in these regions reflects a complex landscape marked by what are considered inefficiencies, inequities, and a growing public outcry for reform. This analysis delves into the intricacies of tolling in Victoria and NSW, examining the systemic issues, the socio-economic impacts, and the potential pathways for reform.
Image NorthConnex source NorthConnex
The Evolution of Tolling in NSW: From Patchwork to Reform
New South Wales, particularly Sydney, has developed one of the most extensive tolling networks in the world, comprising 13 toll roads. However, this extensive network has not evolved without significant issues. The 2024 Interim Report from the NSW Independent Toll Review, led by Professor Allan Fels and Dr. David Cousins, highlights the fundamental flaws within Sydney’s tolling regime. The report points to a patchwork system where each road operates under different pricing structures, creating confusion, inefficiency, and significant financial burdens on certain communities, particularly in Western Sydney.
Westconnex source Sydney Morning Herald
This region, characterised by a high dependency on private vehicles due to limited public transport options, bears the highest toll burden. The existing tolling structure not only exacerbates economic disparities but also influences residential and employment choices, as individuals weigh the cost of tolls against potential income and convenience. The report criticises the current system for lacking transparency and fairness, which has led to widespread dissatisfaction among motorists.
The recommendations put forth by the Independent Reviewers aim to address these issues by proposing a transition to a unified, network-wide pricing structure. This model would implement a declining distance-based toll, where the per-kilometre charge decreases with the distance travelled. This approach is designed to alleviate the financial strain on motorists who must travel longer distances, such as those residing in the outer suburbs, and encourage a more equitable distribution of toll costs across the network.
Sydney Toll Roads, source: Sydney Morning Herald
Another significant recommendation is the establishment of a state-owned special purpose entity to oversee toll pricing and improve competition within the tolling market. By centralising toll pricing authority, the state can ensure that pricing decisions are made with the public’s interest in mind rather than being driven solely by the financial imperatives of private investors. The report also advocates for legislative changes to allow toll prices to be set independently of the original contracts, which are often rigid and favour the interests of toll road operators over those of the public.
The NSW Government has acknowledged the complexity of implementing such reforms, noting that these changes would require extensive public consultation and careful consideration of the impacts on existing contractual agreements. However, the government has expressed a commitment to pursuing these reforms to create a more transparent, equitable, and efficient tolling system that prioritises the needs of motorists.
image Westgate Tunnel, source: APP Group
Victoria’s Tolling Dilemma: The Legacy of CityLink and the Path Forward
Victoria’s tolling system, while different in structure, shares many of the same challenges as NSW. The CityLink toll road in Melbourne, operated as Linkt owned by Transurban, stands as a stark example of the long-term consequences of infrastructure deals that heavily favour private operators. Since its opening in 2000, CityLink has generated nearly $13 billion in revenue, with toll prices increasing at rates significantly above inflation. CityLink an innovator in implementing the first fully cashless tolling system in 2000 helped collecting tolls efficiently. CityLink’s fixed annual increases, which are set to continue until 2029, have sparked criticism for imposing an unsustainable financial burden on motorists.
The origins of CityLink trace back to the 1995 contract awarded to Transurban by the Kennett Government, which allowed for annual toll increases of 4.5% or inflation—whichever was higher—until 2017. However, under the Andrews Government, this contract was amended as part of the West Gate Tunnel Project, allowing for a continuation of toll increases at a rate of 4.25% annually until 2029. This amendment also extended Transurban’s control over CityLink by an additional decade, until 2045. The Parliamentary Budget Office’s 2019 report estimated that these changes would deliver an additional $4.7 billion in revenue to Transurban by 2045, highlighting the significant financial returns secured by the private operator at the expense of motorists.
Critics argue that these fixed toll increases represent a fundamental flaw in the contract design, which prioritised immediate infrastructure development over long-term affordability and fairness for users. Transport economists, such as David Hensher from the University of Sydney, have pointed out that such arrangements have allowed for generous corporate profits while leaving motorists to shoulder escalating costs, particularly in a period marked by economic uncertainty and rising living costs.
North East Link source tcl.net.au
In response to these challenges, the Victorian Government has taken steps to exert greater control over future tolling arrangements. The establishment of the NorthEast Link State Tolling Corporation (STC) represents a significant shift towards state-managed tolling. The STC will be responsible for managing the NorthEast Link road, including setting and collecting tolls when the project opens in 2028. This move could pave the way for a more balanced approach to toll pricing, where the public interest is given greater consideration.
However, the experience with CityLink underscores the complexities involved in balancing the need for infrastructure development with the financial implications for motorists. The Victorian Government’s decision to lock in fixed toll increases in exchange for private sector investment in the West Gate Tunnel Project reflects the difficult trade-offs that governments face when leveraging private capital for public infrastructure. While these deals can accelerate the delivery of critical projects, they can also result in long-term financial commitments that are challenging to renegotiate.
CityLink Source: G&G Engineering
The Socio-Economic Impact of Tolling Systems
Beyond the financial implications, tolling systems in both Victoria and NSW have significant socio-economic impacts. In Sydney, the disproportionate toll burden on Western Sydney residents highlights the broader issue of spatial inequality. These communities, often characterized by lower income levels and higher rates of car dependency, are hit hardest by toll increases. This toll burden not only affects household budgets but also influences broader patterns of economic and social activity, including employment choices and access to essential services.
Similarly, in Melbourne, the escalating costs of toll roads like CityLink can exacerbate financial stress for residents who rely on these roads for daily commutes. The lack of alternative transport options further compounds this issue, as motorists have little choice but to pay increasingly higher tolls. The result is a growing divide between those who can afford the convenience of toll roads and those who cannot, leading to questions about the equity of such systems.
Both states must consider the broader implications of their tolling systems on social equity and mobility. As toll roads become more integrated into the urban landscape, their impact on accessibility and affordability must be carefully managed. This includes considering the needs of lower-income households, providing adequate public transport alternatives, and ensuring that tolling structures do not disproportionately burden specific communities.
Moving Towards Unified and Transparent Tolling Systems
The tolling challenges faced by Victoria and NSW highlight the need for a more coordinated and transparent approach to toll management. In NSW, the proposed shift towards a unified, network-wide pricing structure represents a significant step forward. By centralising toll pricing and introducing a declining distance-based model, the state can address many of the inefficiencies and inequities that have plagued the current system.
In Victoria, the move towards state-controlled tolling with the establishment of the STC offers an opportunity to rethink how tolls are structured and managed. This could lead to more flexible and responsive tolling arrangements that better reflect the public’s interests and the economic realities faced by motorists.
Image: EastLink Toll source: EastLink
EastLink, another major toll road in Victoria, serves as a pertinent example of the complexities and challenges inherent in toll road management. EastLink was a another first in innovation for Australia negotiating a fully integrated tolling system so that users could use their tolling device interchangeably between road networks. EastLink has been at the centre of significant debate regarding market concentration and competitive dynamics in the tolling sector. The Australian Competition and Consumer Commission (ACCC) recently blocked Transurban’s bid to acquire EastLink, citing concerns that it would entrench Transurban's dominant position in Victoria's toll road market.
This decision underscores the broader implications of toll road ownership and control, particularly in concentrated markets where a single operator can gain substantial leverage over pricing and access. The EastLink case highlights the importance of maintaining competitive pressure in the tolling industry to prevent monopolistic practices that could further disadvantage motorists. The road serves as a crucial link between Melbourne’s eastern and southeastern suburbs, and its management has far-reaching implications for the region’s economic and transportation landscape.
On the positive side, the acquisition of EastLink by the Future Fund, Australia’s sovereign wealth fund, has been seen as a stabilizing force for the toll road’s future. The Future Fund’s investment in EastLink ensures that the road’s revenues are reinvested in long-term public interest rather than purely for profit-driven motives.
EastLink remains one of the most utilised toll roads in Victoria, with daily traffic volumes exceeding 250,000 vehicles, reflecting its critical role in Melbourne’s transportation network. The road's efficient management under Horizon Roads and now the Future Fund has continued to deliver significant travel time savings for motorists, contributing to economic productivity and regional connectivity. This acquisition also aligns with the Future Fund’s mandate to invest in assets that generate sustainable, long-term returns, ultimately benefiting the Australian public by supporting vital infrastructure while promoting fair and equitable tolling practices.
However, the path to reform is fraught with challenges. Both states will need to navigate complex legal and contractual issues, engage in extensive public consultation, and balance the competing interests of private investors, government finances, and the needs of motorists. The success of these reforms will depend on the ability of state governments to implement changes that are both fair and sustainable, ensuring that tolling systems serve the public interest while also supporting the ongoing development of critical infrastructure.
Image Westgate Tunnel Project source: Jacobs
Conclusion: A Blueprint for Future Tolling Systems
The experiences of Victoria and NSW provide valuable lessons for other regions grappling with the complexities of tolling systems. The need for transparency, equity, and efficiency in tolling is paramount, particularly as urban populations grow and the demand for infrastructure increases. By learning from the challenges and successes in these states, other jurisdictions can develop tolling systems that are not only effective in managing traffic and funding infrastructure but also fair to all users.
As Victoria and NSW move forward with their respective reforms, the focus must remain on creating tolling systems that prioritise the needs of motorists, promote social equity, and ensure long-term sustainability. The journey towards a fairer and more transparent tolling system is undoubtedly complex, but it is a necessary step in building a more equitable and efficient transportation network for the future.
References:
Future Fund. (n.d.). EastLink investment overview. https://www.futurefund.gov.au/-/media/F159BCE6F5E14456A3E4D1AF0F90F592.ashx
Hatch, P. (2024, June 22). $13b later: How CityLink became toll giant’s best moneymaker in the world. The Age. https://www.theage.com.au/national/victoria/13b-later-how-citylink-became-toll-giant-s-best-moneymaker-in-the-world-20240622-p5dj0x.html
NSW Treasury. (2024, July 16). Full final report of the Independent Toll Review. https://www.treasury.nsw.gov.au/toll-review
Roads Australia. (2024, March 11). Independent Toll Review interim report released. https://www.roads.org.au/news/independent-toll-review-interim-report-released
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