Finance Finance News Trains, buses and trams to become less frequent without major reform: Productivity Commission
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Trains, buses and trams to become less frequent without major reform: Productivity Commission

public transport
The Productivity Commission says an overhaul of pricing is needed. Photo: TND
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Trains, buses and trams will become less frequent and service standards will fall unless governments overhaul fares on public transport, the Productivity Commission (PC) has warned.

Calling for a dramatic overhaul to public transport pricing on Wednesday, the PC said COVID-19 had “decimated” public transport networks throughout the country, leading to fewer passengers and lower revenues.

But the PC also found that Australia’s networks were failing to cover their costs even before the pandemic, prompting them to put forward a set of radical changes to fix the system and ensure service quality is maintained into the future.

“Public transport is essential to our cities, but its pricing has been ad hoc. Fares have not been particularly equitable or efficient, and have not kept pace even with the recurrent costs of running our public transport systems,” PC chair Michael Brennan said in a statement on Wednesday.

“That has put service quality and frequency at risk, and these are the things that matter most to the users of the system.”

Public transport has a funding problem

The PC has also found that concession fares should be better targeted at lower-income groups and that investments in more modern ticketing systems would allow governments to charge fares that match their usage.

But overall, the key issue is that public transport has a funding problem.

Grattan Institute transport and cities program director Marion Terrill said passenger fares only cover a quarter of the cost of public transport in Australia, with government subsidies making up the remainder.

The issue is that public transport use has plummeted during COVID-19, putting even more strain on government budgets to maintain the quality of service on buses, trains and trams, as user revenue has fallen.

The PC says that without efforts to improve the way users are charged, service standards will slip, leading to fewer people using the network.

“Public transport fares have become decoupled from costs, with the risk that governments’ budgetary comfort zones will be breached, jeopardising future service quality, which is the most important driver of patronage,” the PC said.

Ms Terrill told The New Daily that this can turn into a negative spiral.

“[Service] quality and regularity is what gets people to rely on public transport for daily needs,” Ms Terrill said.

“Once you compromise that you can get yourself into a negative spiral where the quality goes down, so less people take it, pushing down the revenue, which further reduces [service] quality.”

Changing public transport prices

The PC has floated several big changes to address the funding issue.

One idea is charging higher fares for public transport users during peak times.

The PC argues peak pricing will help to spread out demand and reduce crowding on buses, trains and trams during busier periods.

It would also increase passenger revenue, directly boosting funding.

“Peak fares can encourage some users to change travel timing at the margin, with even a modest effect helping to delay costly capacity investments,” the PC said in its report.

Ms Terrill said this suggestion makes sense because it would create an incentive for people who can change their travel times to avoid busier times in the early morning and evenings.

You don’t need everybody to change their behaviour, you just need the people who are most able to do so,” she said.

Crowding during peak times has a side effect, too.

It means transport is under-utilised during non-peak times, meaning little revenue is made then.

The PC also called for lower bus fares to reflect the lower costs associated with running bus networks than with trains or trams.

“Prices should better reflect that buses are less costly than trains, and longer distances travelled should come with higher prices,” the PC said.

Concessions should be fairer

Another way to improve Australia’s public transport networks would be to overhaul the way concession fares are distributed, the PC said.

Basically, it found that concession fares are unfair, with many low-income passengers missing out while higher-income passengers reap the benefits.

“State and territory governments should review public transport concession eligibility criteria to better target concessions to those who most need them,” the PC said.

Ms Terrill said the PC was talking about concession fares for seniors.

“In some states at least, we have a blanket seniors discount which is very generous,” Ms Terrill said.

“That’s great if you’re low income, but just turning 60 doesn’t mean you are lower income. Some of the wealthiest people in the community are older people.”

Ms Terrill said a better approach would be to stop using age as a proxy for the concession fare and instead tie it to other factors like health care cards.

She said concessions would be fairer if targeted at people who have already had their incomes assessed by reputable healthcare agencies.
This could include assessments done by Centrelink.