Distance-based Fees May Solve Road Congestion Issues in Australia

A traffic jam on a highwayA distance-based fee may be the solution to Australia’s multi-billion road congestion problems, according to the Productivity Commission.

The proposed charges should be part of reforms for the current driver-tax system, as average motorists pay $1,334 for fees such as fuel excise and registration per year. By shifting to a distance-based fee, the country may solve its $18.7 billion traffic problem.

Tax Reforms

The commission suggested the new tax system as part of a five-year review. It suggested that the declining revenue from fuel excise, which is a result of fuel-efficient vehicles and electric cars, should lead the government to find a new way on how to tax motorists. In case the government sticks to the current system, they would need to implement budget cuts for other sectors, raise public debt or other taxes to fund road projects.

The review also included recommendations for a new tax system for alcoholic beverages. The tax reform would lead to more expensive cask wine and the removal of tax concessions for draught beer.

Economic Boom

Several road construction projects on the pipeline will become the new economic growth driver, amid an infrastructure boom in Australia, according to Macquarie analysts. As much as $323 billion will be spent on infrastructure over the next four years, which bodes well for construction suppliers from light bars for vehicles to earthmoving equipment.

The pace of development for roads will offset the weakness of the housing market in the next two years. Highway construction will contribute significantly to the country’s GDP, as investments are expected to increase to $28 billion per year, the analysts noted.

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The government should act soon to resolve highway infrastructure problems, amid the growing number of cars and motorists. Do you think a distance-based fee would be a better alternative to the current tax system?