Australia must reform the way it pays for road network maintenance, industry leaders have warned.

During a panel session hosted by Infrastructure Australia (IA) at the launch of its 2021 Australian Infrastructure Plan, leaders warned that the current system of road maintenance funding is not sustainable.

The session was chaired by Business Council of Australia Chief Executive Officer Jennifer Westacott. Panellists included Romilly Madew, Chief Executive Officer of Infrastructure Australia; Scott Charlton, Chief Executive Officer of Transurban Group; and Larry McGrath, Managing Director of Rainhill Consulting.

The call comes as the IA report recommended a range of reforms to transport pricing including the development of a national regime for road user charging.

As things stand, funding for road maintenance and upkeep occurs through a national fuel excise duty of 43.3 cents per litre along with a range of state-based charges such as vehicle registration, stamp duty, vehicle transfer administration fees and number plate fees.

Over recent decades, there have been calls for reform as revenue from fuel excise is being eroded by more efficient vehicles.

Indeed, data from the Australian Automobile Association indicates that revenue from fuel excise has fallen from more than $7 per kilometre travelled in 1997/98 to less than $4.50 per kilometre in 2016/17.

Going forward, fuel excise will be further eroded as conventional vehicles are replaced by electronic vehicles which do not use petrol and thus do not pay the levy.

To address the second issue, Victoria now applies a tax on electric vehicles of 2.5 cents per kilometre travelled along with a separate 2 cent per kilometre for hybrid electric vehicles.

South Australia and New South Wales plan to introduce a tax in either 2027 or when EV sales reach 30 percent of all motor vehicle sales in respective states – whichever comes first.

As part of its recommendations, IA has called for the Commonwealth and states/territories to develop a nationally consistent regime for road user charging.

This would be based around distances travelled, would cover all types of vehicles, and would aim to be fair, equitable and efficient.

McGrath says action needs to happen.

He says the need for change is becoming more evident as electric vehicle take-up increases.

“What we are talking about is the basic principle of people paying for what they use,” McGrath said.

“At a simple level, our fuel excise tax which is levied on petrol-fuelled vehicles does in some ways charge people for what they use.

“(But) What we have now is people coming along and buying electric vehicles who aren’t paying the charge (because EVs don’t use petrol). Those people tend to be more well-off.

“Clearly, that is an unsustainable position. We need to do something to fix that because fuel excise is how we pay for the upkeep of our roads.

Charlton agrees.

As car makers worldwide bet on electric vehicles, EVs will become a substantial part of the vehicle fleet over the next decade, he says.

As a result, the amount of funds raised through fuel excise will diminish over time and need to be replaced. If this does not occur through some form of mobility charge, it will need to be done by raising general taxes.

Charlton says Australia should start now and transition away from reliance on the fuel excise duty over time.

This will help to avoid more drastic and disruptive measures as the system begins to crumble in years to come.

Whilst the need for reform is not easily explained, Charlton hopes the IA report will help.

“Every time I see people talk about being slugged with a road user charge, I go ‘you are slugged 43 and a half cents with fuel excise tax now’” he says.

“Those people living in the outer suburbs with older cars are paying a much more regressive tax (under the current fuel excise system).

“When it comes from me, nobody wants to believe that because I am in the road industry.

“Hopefully, when it comes from Romilly (Madew) and IA, it will have a better sound to it.”

Madew says reform needs to happen.

She says several principles should guide this.

First, reform should be introduced according in stages across the fifteen-year timeframe covered in the IA plan

Next, the plan should be consistent at a national level. This means that situations where drivers are forced to navigate various charges which use different charging technologies as they move from one state to another should be avoided.

Where work has already been done at a state level, Madew says this should be leveraged and adopted nationally where appropriate.

Finally, reform must be fair and equitable.

Madew says IA has a role in making the case for change. This can occur not only through its role as adviser to government but also by engaging with the government, the community and the industry.

She says community understanding of fuel excise and transport pricing is lacking. Accordingly, IA in its plan has tried to explain the issues in a way which is easy to understand.

“Part of what we have identified in the plan is to try to make it easy for the community to read the reform and make it understandable,” Madew said.

‘When you read it (the section of the plan referring to transport pricing), it is clear. It explains why we need reform across all vehicles – not just passenger but freight as well – and what that means for you.

“There is a role for IA to play (in communicating the need for reform). That is part of the work we are doing to continue to advocate for these reforms.”