Thursday, June 30, 2011

Think smaller on roads

VICTORIA should build fewer mega-road projects such as the proposed freeway under the Maribyrnong, and invest instead in more small road projects to clear choke points in the network, a report to a state government inquiry has recommended.

In findings that implicitly criticise the former Labor government's approach to decision-making, economic consultant ACIL Tasman reports that the headline-grabbing big road projects in Victoria have barely paid their way, returning benefits no bigger than the costs.

By contrast, it says, evaluations published by the industry's research arm, Austroads, show that smaller road projects in Victoria typically deliver benefits worth two to four times the cost of the project.

The report says the decision to build Australia's biggest desalination plant in one hit, rather than adopt a staged approach, has been "quite costly" for the state. It also finds that too much emphasis was put on water restrictions, when raising the price of water would have done the job more simply.

Tackling a wide range of topics, the report also suggests that the Baillieu government should:

Consider a historic tradeoff to cut stamp duties, such as those on property sales, and raise more revenue from land tax, by overhauling the exemptions that mean most land goes untaxed.

Introduce congestion pricing on Melbourne's roads, and earmark the money to pay for improving roads and public transport.

Allow private operators to run Manila-style jeepneys, minibuses or group taxis on routes poorly served by public transport, or at times when trams, trains or buses are rare.

Offer 2500 to 3000 lucrative postgraduate scholarships to the world's best and brightest, to attract them to Melbourne, where they could become generators of future opportunity.

ACIL Tasman prepared the report for the Victorian Competition and Efficiency Commission, the state's equivalent to the Productivity Commission, which has been asked by Treasurer Kim Wells to prepare a state-based reform agenda.

The report, Victoria's Productivity, Competitiveness and Participation, finds that in general Victoria's infrastructure is in good shape, relative to that in other states, and well-run. But it warns population growth is putting it under more pressure, intensifying the need to get value for money.

It says the avoidable costs of congestion of Melbourne roads are on track to double by 2020 and urges the government to build the case publicly for congestion taxes, with proceeds earmarked for road and rail projects, to dissuade people from driving at peak hours.

On taxes, it points out that Victoria has the lowest land tax revenue of any state but the highest reliance on stamp duty on property sales, taxes on insurance and gambling taxes.

It says Victoria could achieve real productivity gains by shifting its tax balance to get more from land tax which "has a broad and immobile base, thus minimising the effect on economic decision-making" and less from taxing business transactions.

The report says Melbourne's public transport compares well with that in other capital cities, but it urges the government to relax restrictions to allow informal minibuses to operate where there are unmet needs.

It also warns the Baillieu government that to put a rail link into the proposed container port at Hastings "would be challenging" and it might have to settle for a port serviced only by trucks.