NO.007

PRODUCTIVITY COMMISSION TO REVIEW ECONOMIC COSTS OF FREIGHT INFRASTRUCTURE

AND EFFICIENT APPROACHES TO TRANSPORT PRICING

The Treasurer today announced that the Productivity Commission will undertake

a public inquiry to review economic costs of freight infrastructure and efficient

approaches to transport pricing.

The Treasurer noted that the review will determine the full financial and economic

costs of providing road and rail infrastructure and identify the optimal methods

and timeframes for introducing efficient road and rail freight infrastructure

pricing. This will inform the Government and help to implement efficient pricing

of road and rail freight infrastructure through consistent and competitively

neutral pricing regimes.

The Productivity Commission will shortly release an issues paper and invite

expressions of interest from anyone wanting to participate in the review. Anyone

with interest in the inquiry is encouraged to make a submission to the Commission.

The Terms of Reference for the inquiry are attached. Further information about

the inquiry is available from the Productivity Commission at

www.pc.gov.au or by phone

02 6240 3239.

MELBOURNE

23 February 2006

Contact: David Alexander

02 6277 7340

Terms of Reference

REVIEW OF ECONOMIC COSTS OF FREIGHT

INFRASTRUCTURE AND EFFICIENT APPROACHES TO TRANSPORT PRICING

Productivity Commission Act 1998

I, PETER COSTELLO, Treasurer, pursuant to Parts 2 and 3 of the Productivity

Commission Act 1998, hereby refer the economic costs of freight infrastructure

and efficient approaches to transport pricing to the Commission for inquiry

and report by December 2006. The Commission is to hold hearings for the purpose

of the inquiry.

Background

The purpose of the review is to assist COAG to implement efficient pricing

of road and rail freight infrastructure through consistent and competitively

neutral pricing regimes, in a manner that optimises efficiency and productivity

in the freight transport task and maximises net benefits to the community.

Scope of the inquiry

The review will estimate the full financial costs of providing and maintaining

freight transport infrastructure on major road and rail networks. It should

be based on the principle that prices charged should reflect all costs in each

mode and that there are benefits in a national pricing regime. In estimating

these financial costs, the review will take account of the extensive research

and studies on this issue, including by the National Transport Commission and

the Bureau of Transport and Regional Economics.

The review also will assess the full economic and social costs of providing

and maintaining road and rail freight infrastructure, if it judges this to be

feasible. Such costs would include environmental and safety impacts of different

transport modes. The review would assess existing studies of these economic

and social costs and comment on the strengths and weaknesses of methodologies

used. The review should also assess what information or future research could

improve the quality of the estimates.

The review will investigate options for transport pricing reform, including

moving to mass, distance and location charging of freight transport. In considering

distance based charging regimes the review will:

1. consider principles and practical options for the structure of the different

   pricing regimes;

2. estimate the impact of charging regime options, including on transport operators

   and users and specific locations;

3. consider options for implementing any new pricing regime, including the

   practical costs and benefits of alternative technology options; and

4. provide advice on options for the design of and timeframes for implementing

   mass distance location based charging regimes, taking into account adjustment

   issues. The review will not address fiscal implications which will be assessed

   by governments following the review’s completion.

The review will also identify any other competition, regulatory and access

constraints on the economically efficient pricing and operation of road and

rail freight transport and related infrastructure networks and assets, including

access to and competition between inter-modal facilities, and make recommendations

on the options for removing these impediments and increasing efficiency.

In undertaking the review, the Commission is to consult widely with stakeholders

on its contents and recommendations and to produce a draft report. The final

report is to be presented to COAG by December 2006.

PETER COSTELLO