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Interstate Road Transport Charge Amendment Bill (No. 2) 2008 Road Charges Legislation Repeal and Amendment Bill 2008

CHAIR (Senator Sterle) —I declare open this public hearing of the Senate Rural and Regional Affairs and Transport Committee. The committee is hearing evidence on the committee’s inquiry into the Interstate Road Transport Charge Amendment Bill (No. 2) 2008 and a related bill. The bills amend the Interstate Road Transport Charge Act of 1985 and related legislation to increase registration charges for heavy vehicles registered under the Federal Interstate Registration Scheme.

Before the committee takes evidence, I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee. The committee prefers all evidence to be given in public, but witnesses may request to be heard in private. It is important that witnesses give the committee notice if they intend to ask to give evidence in camera. If a witness objects to answering a question, the grounds for the objection should be given and the committee will determine whether it will insist on an answer. I also remind people in the hearing room to switch off their mobile phones. I welcome representations from the National Transport Commission. Do you wish to make a brief opening statement before we go to questions?

Mr Dimopoulos —Thank you for giving the NTC an opportunity to present to the Senate committee. It may be helpful if I share some opening thoughts. I would like to briefly explain NTC’s role in the heavy vehicle charges and more specifically talk to the points in our written submission. We are also happy to respond to any further questions.

In terms of background, the NTC’s role is as a national independent body reporting directly to the Australian Transport Council. It is funded by the Commonwealth, state and territory governments. The NTC’s predominant domain of responsibilities revolve around regulatory reform for road, rail and intermodal transport, including heavy vehicle charges, and as part of its role it is also expected and required to consult with industry and government on reforms.

By way of background to the charges reform, following the outcome of the Productivity Commission’s Road and Rail Infrastructure Pricing inquiry in 2007, COAG and the ATC set some clear principles that underpin NTC’s charging model. This included some of the predominant features that heavy vehicles overall should recover their share of road infrastructure related costs, each class of vehicles should pay its own way, and the third element was that heavy vehicles should continue to pay their way. The latter requirement by COAG for continued cost recovery is an important point in the context of today’s hearing. I will come back to that later.

It is also worth pointing out that governments generally were reluctant to implement national productivity reforms for heavy vehicles when they were not paying their way or it was considered that they were not paying their way. Also, getting charges right was the first step to COAG’s productivity reform agenda around incremental pricing and mass, distance, location charging.

NTC’s submission really focuses on three key issues relevant to this hearing. The first is with respect to the consultation process. On all reforms, as I mentioned earlier, the NTC takes extensive communications and stakeholder consultation. We take that very seriously. All of our reforms require a regulatory impact statement approved by the Office of Best Practice Regulation. We have formal standing government and industry advisory bodies. We engage regularly with all our stakeholders through one-on-one discussions, briefings and workshops. At the end of the day we all have common goals, and they are better productivity and safety outcomes for transport for Australia.

For the charges determination it is important to recall and make note that in terms of consultation we had 22 written public submissions. They were all published on our website. We had public focus group meetings around Australia, namely, in Brisbane, Sydney, Melbourne, Canberra, Adelaide, Perth and Darwin. They were chaired by commissioners and I was also present, with transcripts again published on the NTC website. We also provided direct access to the charging models under supervision—whoever was prepared to sit down and go through the model. We had prompt responses to information requests by a number of stakeholders.

We believe the consultation process adopted by the NTC for the charging determination was very inclusive and led to many practical, substantial and pragmatic changes in the final proposal. In other words, a number of changes were made as a result of the consultation process, namely, we had more flexible multi-combination charges and in listening to our stakeholders we recommended that there be a phasing in of the charges over three years to give industry time to adjust.

The second key point we have made in our submission is around the calculation of the road-user charge. During consultation there was some debate about what charges should be included in the modelling, and in this respect I would like to make the following points. ATC principles require the NTC to recover infrastructure related costs only. We could not, for example, include other charges, such as the old excise on high-sulphur diesel, which was part of a different government policy to encourage cleaner fuels. We need to remember this approach worked both ways, because the NTC recommended against recovering full enforcement costs because some activities, such as speed compliance, were not in our consideration related to infrastructure use. We had an independent transport consultant verify the NTC’s methodology and approach in our model, and their report is on the website. The Productivity Commission also had a close look at and scrutinised the charging model, and it gave it a tick. If anything, they thought we were a little bit on the conservative side by international standards.

The third point in our submission is around the annual adjustment process. Currently heavy vehicle registration charges are indexed each year to reflect changes in roads spending and use. Each year NTC publishes the data and the full calculations on its website. This provides for a very transparent and detailed approach. An issue with the current model is that the fuel based road-user charge, which recovers roughly two-thirds of total heavy vehicle costs, is not indexed. This causes what we would term a price shock or catch-up whenever the NTC is asked to review the charges. As mentioned earlier, COAG’s directive to ensure ongoing cost recovery effectively required full annual indexation of the fuel based road-user charge. It is worth pointing out that this also means that the fuel charge can go down if road spending falls.

Thank you for the opportunity to make some opening remarks. I believe we have covered the key points as contained in our submission and I am happy to take any questions that you may have.

CHAIR —Thank you. What is the difference between the federal interstate registration scheme and state registration schemes?

Mr Dimopoulos —Do you mean the technical aspects?

CHAIR —Dollars.

Mr Egger —We are talking about $48 million versus about $550 million.

CHAIR —It is quite a substantial amount. Am I right that there are three per cent of the vehicles under the first scheme?

Mr Egger —Yes.

CHAIR —As opposed to the other 97 per cent having the majority of the money.

Mr Dimopoulos —In very rough terms.

Mr Egger —In terms of numbers of vehicles it mainly applies to multi-combination vehicles and articulated trucks rather than the rigid truck fleet. That is where the numbers are.

CHAIR —Before I go to my colleagues, who will be keen to ask some questions, you said there had been extensive consultation with stakeholders. Does that mean everybody who has a stake in Australia’s road transport systems was in the tent, so to speak? How long have these talks been going on?

Mr Dimopoulos —These talks have been over a 12- to 18-month period. They started as soon as we were directed by ATC to look at heavy vehicle charges—a good 12 months at least.

Mr Egger —Yes, 12 months. Because of the third determination not being voted in favour of, there was consultation there where we established a lot of the key principles and we went over our cost allocation process on how we charge. A lot of that was unchanged and we made that clear to everybody. Effectively, because the third determination was not passed, you could almost count that as an extra two years of consultation, over and above the 12 months that we did specifically for the most recent determination.

CHAIR —I must apologise. I received the submissions only this morning; I have only just got back. I have quickly flicked through them. It would be fair to say that the increase in the excise is from 19c to 21c. Was there any conjecture on that figure amongst all of the stakeholders?

Mr Dimopoulos —No, it was not a key point of conjecture. I participated in all of the consultations held in all capital states and it was not a particularly contentious issue.

CHAIR —I can take it that the industry accepts that it is going to pay its way in terms of road funding?

Mr Dimopoulos —That is correct. We were working on the premise that industry needs to pay its way, because that was the principle that underpinned the heavy vehicle charges.

Senator HUTCHINS —Am I right in stating that articulated vehicles will pay more costs but the registration costs for rigid vehicles will be reduced?

Mr Dimopoulos —Some actually fell.

Senator HUTCHINS —Under this legislation what will a four-tonne truck pay for registration?

Mr Dimopoulos —We will just look it up for you.

Senator HUTCHINS —It is my fault. I did not have the paperwork.

Mr Egger —The smallest vehicle that comes under our jurisdiction is 4.5 tonnes. It is about an eight per cent or nine per cent increase at most that you are talking about for the smaller sorts of vehicles. Effectively, we go from $355 to $380 as a basic registration. That was the minimum increase, but there were some specific vehicle types, particularly within the rigid classes, where we found that they were paying far too much based on the relative amount of travel that they did.

Senator HUTCHINS —Which ones would they be?

Mr Egger —In particular they are the four-axle rigid trucks. They were being charged too much.

Senator HUTCHINS —Do you have any idea of the freight task they are involved in throughout the country?

Mr Egger —We are talking about twin-steer-type vehicles in particular.

Senator HUTCHINS —Do you have that information or is it available?

Mr Egger —We can take that as a question on notice.

Senator HEFFERNAN —Bugger all, is the answer. They will do concrete. Second-hand trucks will do wheat runs at harvest, but twin-steer are intermediate, not mainline.

Senator HUTCHINS —Can you take on notice the categories of vehicles and what their actual reduction or increase will be in their costs? In addition, can you identify how many vehicles are in that category?

Mr Egger —We do have the number of vehicles within that category.

Mr Clarke —The three-axle rigid might be one to look at. That has a falling cost. There are quire a few of those vehicles currently registered.

Senator HEFFERNAN —Is this just a plain old bogie drive?

Mr Clarke —We are talking about ones that are over 18 tonne with no trailer.

Senator HEFFERNAN —Not twin steer, just bogie drive/single drive?

CHAIR —You have lost me. What are we talking about?

Senator HEFFERNAN —That is what I am trying to find out.

CHAIR —Senator Hutchins has asked the question.

Senator HUTCHINS —I am trying to find out categories of vehicles.

Mr Egger —What we are talking about are vehicles where there was a recommended decrease in their registration charge. Effectively all three-axle trucks that do not normally pull a trailer, from 4.5 to 18 tonnes, of which there are many thousands, and all four-axle trucks other than those that have a gross vehicle mass of more than 42.5 tonnes. Anything under 42.5 tonnes in the four axle—

Senator HEFFERNAN —Are these articulated?

Mr Egger —No, we are just talking about rigid trucks.

Mr Dimopoulos —Rigid vehicles.

Mr Egger —There are also decreases for rigid trucks.

Senator HEFFERNAN —There is no such thing as a twin-steer bogie drive with 42 tonne gross.

CHAIR —He is not saying 42. He is saying up to 18 tonne not towing a trailer.

Senator HEFFERNAN —Gross?

Mr Egger —In gross vehicle mass. There are many thousands of vehicles that actually have a deduction in registration charge. As I said, they include the bulk of three-axle rigid trucks that do not normally pull trailers, the bulk of four-axle trucks that do not pull trailers, and we are talking about smaller articulated trucks, three- and four-axle-type semis. Smaller articulated trucks are getting reductions in their charges.

CHAIR —Are you talking about rigid trucks that are towing a trailer?

Senator HEFFERNAN —No. Articulated there—

Mr Egger —I am talking about two different things. I was initially talking just about rigid trucks. I am talking about the bulk of three-axle and four-axle rigid trucks. They have experienced a decrease in their charges. If you then move away from the rigid trucks into the articulated truck category, the smaller single trailer articulated that have three or four axles have all experienced a decrease in their registration charges this year in all of the states that have implemented it.

Senator HEFFERNAN —So, the single-axle bogie is not articulated?

Mr Egger —Yes.

Senator HUTCHINS —Is the methodology used effectively to add up the road-user charges an OECD standard? Is the one that we have used here as transparent as in, say, North America and Europe?

Mr Egger —Australia has always had quite a unique system. It is really the basic charging system or the pay-as-you-go system that we have used since the beginning of the NTC in 1992. That has never really been called into question. We do not have a benchmark overseas we can rely on.

Senator HUTCHINS —Has that one been accepted by industry and government?

Mr Egger —It has been accepted by industry. They have been happy to use it.

Senator HUTCHINS —They do not see the formula as overcompensating on charges; it is X equals X in terms of how much they are contributing to use on the road and how much the charges should be?

Mr Egger —Yes. The basic principles of how we calculate it have been fundamentally accepted. There have been arguments over some cost allocations rules, for example, because we changed one of them to do with maintenance, which was used in this most recent determination. Apart from that, the basics of the methodology have remained unchallenged by industry.

Mr Dimopoulos —There are two pieces of relevant information here. The Productivity Commission had a very close look at our model and came out on the side that they probably thought it was a bit too conservative. The other point is that in terms of the breakdown of the costs they were all in our regulatory impact statement, so it was all very transparent as to the components of those costs and their makeup.

Senator HUTCHINS —I am sure if anybody had a complaint they would have raised it by now.

Senator MILNE —I would like to know what your response is to the criticism from people in the industry in relation to vehicle fuel excise going from a transparent system based on historical data to an automatic indexation according to a formula. Their argument is that the system as it currently exists is transparent but it will be unclear how this charging arrangement will work. How do you respond to that criticism?

Mr Clarke —The previous process is almost the same process that we are going towards in terms of the data transparency. It is just that the formula is a little different. Previously we published data on road expenditure and so forth, and we will do the same thing in the future. As to the way the formula is calculated, we have put detailed calculations on our website previously, and that will be the same in the future. It will be the same level of transparency and the same data. The transparency that was there before will also be there in the future. It is just that the formula has had some improvements or changes to it and that will obviously flow through to the new calculation. In terms of all of the information that people could see on the website previously, namely, the annual adjustment calculations, that information will also be there in the future. There is not change to that data transparency. It is the same as it was before.

Senator MILNE —It is not just seeing it on the website. The issue is that it was based on actual historical data. This is based on a formula. Can you explain that to me?

Mr Clarke —Previously it was based on historical data. The new formula is also based on historical data. Now, instead of being based on previously nominal seven-year average, in future it will be based on a real seven-year average. It is the same data set, the same road expenditure, the same seven-year average of data that is used; it is just done a little differently to ensure that we are closer to what the new determination would look like if we had run it. We are trying to make sure that we ensure total cost recovery as we move forward over time. As I said, the same level of road expenditure transparency will be there. The formula calculation will be there. All the relevant data that was there before will also be there in the future.

Senator MILNE —Secondly, I take on board the aim to make sure that each class of vehicle pays their own way. That would imply that at the moment that is not occurring as much as it should be. Can you tell me what level of subsidy currently goes to B-doubles and B-triples from other sectors in the industry?

Mr Egger —Prior to the first year of the phase in of determination charges occurring, B-doubles were experiencing a subsidy of around $11,000. That only includes charges that are directly attributable to that vehicle type. If you include what we call common costs, that actually increases to about $16,000. The critical figure is $11,000. We were seeking to eliminate that $11,000 subsidy from this determination, and we were phasing it in over three years, because it meant a big increase for B-doubles.

At this point in time the current subsidy is about $9,000. We have had the first increase for B-doubles occur, and that has basically dropped the subsidy from $11,300 to just under $9,000 at this point in time. In the next two years, assuming the fuel charge rises and the new trailer charges come into effect, that will be totally eliminated and there will no longer be any subsidy whatsoever.

Senator MILNE —What does that mean for the transport economics of those vehicles in Australia? I understand that a lot of other countries have phased them out because of safety issues in so on.

Mr Egger —Can I have that question again, please?

Senator MILNE —There are two issues. Firstly, what does this mean for those people using B-doubles and B-triples in terms of their cost-effectiveness? The second question is related to safety. I noticed earlier when you talked about your hearings that you did not have any in Tasmania. There is quite a deal of concern about B-doubles in Tasmania and the safety record as well.

Mr Egger —The reason it is being phased in over three years is to allow industry time to make contract-type changes. That was deliberately done to allow them to accommodate those charges as best they could. That was a deliberate policy. The fact is that we are talking about registration charges that might make up about five per cent of the actual operating costs of a typical B-double operator. We are talking about something that is making up a relatively small share. That was a critical thing. We had done a survey during the third determination of about 20 B-double operators and their reaction if their B-double charges increased. There were hardly any that were prepared to go back to using single trailer-type vehicles. We are quite confident that it was a cost that industry could bear, particularly in phasing it in over three years.

Mr Dimopoulos —We had some independent studies to look at what the impact would be on the B-double operating costs. On average it would increase at around 2.8 per cent. If we went to the next level of detail as to what would be the impact on consumer goods using B-doubles, on a $100 grocery bill using B-doubles it would be around 13c in every $100.

Senator McGAURAN —So, 13c per $100?

Mr Dimopoulos —That was the total impact on a $100 grocery bill.

Senator McGAURAN —That is significant.

Senator HEFFERNAN —The only thing significant about it is that it is a guess and it is probably bullshit.

CHAIR —Senator Heffernan.

Senator HEFFERNAN —Under the old regime there was a demographic slant where you put more cost on the A trailer than the B trailer. Are you continuing that? There was a certain demographic in the trucking industry where you could run a tri-axle cheaper than a B-double because, as you know, the excise was on the front trailer and not the back one.

Mr Egger —All of the focus in the past has been on the actual pulling vehicle, the prime-mover. The trailers were charged a minimum fee and there was a standard per axle charge. We have now changed that system to one where we have differential trailer axle charging.

Senator HEFFERNAN —Is that what the states have at present?

Mr Egger —No, they have not at the moment. They have the same charge for every—


Mr Egger —ACT has as well. Every state and territory has the same system. The differential trailer charging system does not come into effect until 1 July next year.

Senator HEFFERNAN —That is not right. I will clarify that later. My understanding at the present time is that there is a differential in the A and the B trailer. There are more registration costs on the A trailer than the B trailer.

Mr Egger —Not at this point in time. It does not come into effect until 1 July next year. Every trailer, no matter what type and axle configuration, is charged a standard fee of $380 per axle.

Senator HEFFERNAN —Depending on the interstate running, though.

Mr Egger —It does not matter if it is interstate or where it is.

Mr Clarke —If you added up the cost per axle times the number of axles, the cost for that particular trailer might be more than another trailer that uses a different number of axles.

Senator HEFFERNAN —There are people in the industry who are giving consideration to going back to a bogie tri-axle because of this configuration.

Mr Clarke —At the moment the cost per axle is the same for every axle, but we are moving to a different system. It depends on the number of axles on the trailer.

Senator HEFFERNAN —Can you clarify that?

Mr Dimopoulos —We are happy to provide further information on that.

CHAIR —Senator Milne.

Senator MILNE —I have a question in relation to the road-user charge being linked to the road expenditure. I see this as a bit of a chicken and egg scenario. Am I to understand that the road-user charge will fall if the road expenditure falls?

Mr Dimopoulos —In simple terms that is correct.

Senator MILNE —That is a conundrum.

Senator HEFFERNAN —How would we ever know?

Mr Egger —We would tell you.

Senator HEFFERNAN —Do you think we would believe you?

Mr Clarke —We do publish that data when we do the annual calculation. We publish how road expenditure has moved.

CHAIR —I am sure the transport industry would assist you in calculating it as well.

Senator HEFFERNAN —The industry is concerned that some of this money goes into truck stops. It is ridiculous now that, with the dysfunctional interstate arrangements for logbook truck stops, you can legally be allowed to pull up and there is no truck stop. Are we going to get some sort of guarantee that this money is going to find its way into truck stops, or are we just going to have this ridiculous situation we have now where you can get pinged because you have not got yourself to a truck stop and you are over your log?

CHAIR —With the greatest respect, what you are being told outside and what actually happens in real life may be different. I am happy to have a personal conversation with you. That is a very simplistic ridiculous argument that some sectors of the industry like putting up when it suits them. Let me tell you, Senator Heffernan, what happens in real life and what you get told are three different things.

Senator HEFFERNAN —Unlike you, I still drive trucks.

CHAIR —Unlike you, I’ll tell you the truth. Senator Milne.

Senator MILNE —I would like to come back to this conundrum about the road-user charge and the expenditure on roads. The problem that I have is that, if you did not have some of these trucks on roads that are not built to take them, then governments would not need to spend the money on them. You end up with a constant circular argument. Where do you break that conundrum when it comes to putting B-doubles on country roads? Perhaps I should elaborate on that. I refer to Tasmania, in particular. Tasmania’s roads were not built for B-doubles and now we have them. The road damage is quite considerable, which requires expenditure on the roads to maintain them for all vehicle users, including B-doubles. It becomes a constant roundabout. If the B-doubles were not there, the state governments would not be expending anything like what they have to expend on the roads. At what point do you make a judgement about when you say, ‘This is ridiculous. We ought not be destroying the roads in the first place’, saving the state a considerable amount of money? You are never going to recoup from those few B-doubles the actual cost of maintaining those roads. Do you ever look at that issue?

Mr Dimopoulos —We are happy to take that question on notice. We can come back to you on that and give you an informed analysis of it.

Senator MILNE —Just out of interest, why did you not have a hearing in Tasmania?

Mr Dimopoulos —In Tasmania there as a lack of interest. That was not our intent. We had scheduled a meeting down there and we did not get any takers.

Mr Egger —There was a visit specific to the determination, but it was for the forest industry. There was not sufficient interest for the general one.

Senator MILNE —What do you mean by the ‘forest industry one’?

Mr Egger —We received a specific invite from the forest industry to brief them on the likely impacts at that stage of the determination. I attended a half-day seminar there to brief them on what we had put in our determination.

Senator MILNE —I suspect in the next few years state government expenditures in particular on road funding will fall by virtue of financial imperatives and the recovery will not be sufficient to be able to maintain the road system.

Senator HEFFERNAN —You did not answer the question. Are you going to target some of this money and put it into truck stops?

Mr Dimopoulos —That is not for the NTC to decide. That is for government policy.

CHAIR —We have run over time. Do you have any further questions, Senator Heffernan?

Senator HEFFERNAN —So, it is not in your bailiwick to deal with weight issues?

Mr Dimopoulos —We were not requested to look at rest areas.

Senator HEFFERNAN —I am not talking about that. I will come back and hit you somewhere else on that.

Mr Egger —Are you talking about vehicle mass?

Senator HEFFERNAN —What about the weight?

Mr Dimopoulos —What do you mean by that?

Mr Clarke —Do you mean standardisation of vehicle weights around Australia?

Senator HEFFERNAN —I am talking about vehicle mass and tolerance. Do you deal with that?

Mr Clarke —With respect to what?

Senator HEFFERNAN —If I am a truckie at Walgett this morning and I have run over a rough paddock, and they have filled it out of a field bin, the truck settles and you fill it to where you thought it is, and you get to the weighbridge, you are a tonne over and they ping you because there is no tolerance in New South Wales and there is a 10 per cent tolerance in Queensland, how are we going to deal with that and who do we talk to?

Mr Egger —They are not relevant determination issues. They are specific issues for—

Senator HEFFERNAN —You are the National Transport Commission. Does that ring an alarm bell or do you just go home and get buried in bureaucratic bullshit?

CHAIR —I know we can all be passionate about this industry, but I do not think you have to give a serve to the officials from the NTC.

Senator HEFFERNAN —They are as good as anyone.

CHAIR —Gentlemen, you can answer that it is a state issue; you will not get into trouble if it is not your issue.

Mr Dimopoulos —You have hit the nail on the head. Under our constitution—

Senator HEFFERNAN —What about harmonisation across the states? Isn’t that your issue?

Mr Dimopoulos —That is correct. We make those recommendations for harmonisation across all the states, but under our constitution the states reserve the right to make those variations, which is beyond our power.

Senator HEFFERNAN —Do you think it is stupid that there is not harmonisation? Have you got the courage to answer that?

Mr Dimopoulos —I do not believe it is in the industry’s interests not to have harmonisation across all states.

Senator HEFFERNAN —Do you know what I am talking about?

Mr Dimopoulos —I do.

Senator HEFFERNAN —The lack of tolerance in some states.

Mr Dimopoulos —Yes, I understand the issue.

CHAIR —We do understand and Mr Dimopoulos has answered the question. I am sure that we will hear more about it.

Senator HEFFERNAN —If we cannot talk to you then I might as well go and bury my head in the sand somewhere.

CHAIR —If there are no further questions, I will move on. We have extended the program by half an hour until 7.00 pm tonight. I thank the officials from the National Transport Commission, and I will ask you to hang around in case there are some clarifications for the purposes of Hansard.

Mr Dimopoulos —Thank you for the opportunity. We have a 5 o’clock flight. We will be very happy to follow up on anything you need.

 [4.24 pm]