Funding public transport for our cities: A thorny issue but new models offer hope

17 June 2015

The latest Australian Infrastructure Audit Report shows Australia’s transport infrastructure gaps are growing and threatening our productivity as a nation. The problem is particularly acute when it comes to public transport in our capital cities.

The connection between effective transport infrastructure, particularly public transport systems, and economic growth is well-recognised[1]. The world’s most productive cities are well-serviced by extensive and efficient public transport systems.

The latest World Economic Forum Global Competitiveness Index underscores this point. The index shows that countries with poorer infrastructure rankings are also less internationally competitive.

Australia is currently ranked 20th for infrastructure on the Competitiveness Index, behind other nations in our region – Hong Kong, Singapore (ranked 1 and 2 respectively), Japan (6th), Taiwan (11th) and South Korea (14th).

Rethinking urban transport funding

Mounting pressure on urban transport infrastructure is predicted to become a significant drag on productivity as our capital cities expand and Australia’s population balloons to 30 million people by 2031[2].

It’s a thorny issue for governments. Growing social security and health costs mean there’s a diminishing pool of funds available for better transport infrastructure (see Intergenerational Report).

Public transport systems such as passenger rail and metros are also often constrained by higher upfront capital costs, longer development and payback periods and lower financial returns as compared to toll roads.

The OECD in its report Mobilising Private Investment in Sustainable Transport Infrastructure encourages the scaling up of private investment for more sustainable public transport systems. In particular it advocates passenger rail, metros, bus rapid transit systems, non-motorised transportation and electric vehicle charging infrastructure (rather than just giving priority to funding road transport projects).

Governments across Australia are looking for ways to slow the auto-based urban sprawl in cities. Future productivity gains will come from compact cities that integrate road systems with well connected public transport options.

NSW is moving ahead with the Sydney Metro project and Sydney Light Rail together with various road transport initiatives such as Westconnex and Northconnex. It is also planning for land value capture over rail corridors. (NSW Long Term Transport Plan; A Plan for Growing Sydney)

Unsolicited proposals have been considered and adopted by the NSW Government for various projects such as the Wynyard Station Transit Hall upgrades and the Herring Road Transport interchanges and the NorthConnex project.

Other potential innovative funding and traffic planning models for public transport include[3]:

  • congestion pricing and intelligent transport systems (including the use of corridor/area pricing; time dependent tolling, electronic road pricing, and parking guidance systems),
  • relocation of traffic using different modes by pricing, and
  • the Inverted Bid Model - a new procurement process to support investment in infrastructure by long-term equity investors such as Australian superannuation funds. 

It is an ongoing challenge to find new ideas and innovations for a better approach to urban transport systems. Singapore, an exemplar in integrated land use and transport planning, has now set up a Land Use Transport Innovation Fund.

Australia is hosting the G20 Infrastructure Hub. This gives us the opportunity to take a lead and demonstrate we can develop long term, sustainable urban transport strategies. 

[1] There is a body of research that shows there is a clear economic growth dividend when cities invest in making their public transport networks efficient. The Mobility Opportunity Report which studied transportation systems in 35 major cities around the world concluded that if the cities invested in making their public transport networks efficient, the economic benefit today would be worth US$119 billion annually. This benefit would rise to US$238 billion by 2030.

[3] Brookings Institutions, Funding Transport Infrastructure with User Fees, Feb 2013; Chew, A and Storr, D, Tollroad Funding Alternatives Emerge from the Shadows”, [2010] ICLR 5; Infrastructure Australia, Urban Transport Strategy, December 2013; The McKell Institute, Getting us there – Funding the Transport Infrastructure of Tomorrow, November 2014; Infrastructure Partnerships Australia, Inquiry into the Utilisation of Rail Corridors, February 2012; Victorian Government, Plan Melbourne, May 2014; World Bank, Cities on the Move - Urban Transport Strategy Review, 2002

The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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Andrew Chew

Partner. Sydney
+61 2 9210 6607


Louise Camenzuli

Partner. Sydney
+61 2 9210 6621


Rommel Harding-Farrenberg

Partner. Sydney
+61 2 9210 6366