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2007 Heavy Vehicle Charges Determination

Updated: 14 October 2008

Why should heavy vehicle charges go up?

Since heavy vehicle charges were last reviewed in 2000, road expenditure across all levels of government has increased by 33%.

Heavy vehicles’ share of total road spending ($11.67 billion) is $1.95 billion a year. This is paid through registration fees and a net fuel charge.

Currently, heavy vehicles – particularly bigger trucks, like B-doubles – underpay their cost of using the roads by $168 million.

For cost recovery, big trucks face registration fee increases phased-in over three years. Registration charges for smaller vehicles will decrease. The fuel (road user) charge will increase by 1.367 cents to 21 cents per litre.

Who says charges should be reviewed?

The National Transport Commission (NTC) was directed by the Australian Transport Council (ATC) to update heavy vehicle charges after the Productivity Commission’s Road & Rail Freight Infrastructure Pricing Inquiry (2007) concluded “Substantial increases in road investment in the past couple of years make it likely that heavy vehicle charges would have to rise to maintain cost recovery.”

In April 2007, the Council of Australia Governments’ (COAG) endorsed the charges review as the first ‘building block’ of broader road pricing reform.

What is COAG's pricing reform agenda?

COAG’s reform program will improve the link between road use and funding. This will be done in stages over seven years; including incremental charges for heavier (more productive) loads. Better pricing signals will encourage use of the right truck on the right road at the right price; and investment on the right roads in the right place at the right time.

Why are large increases proposed for B-doubles?

Bigger trucks are currently cross-subsidised by smaller trucks. COAG’s pricing principles require those cross-subsidies to be removed. B-doubles have benefited significantly from higher road spending; particularly improved access around ports, urban arterials, grain silos, sale yards etc. The number of B-doubles has increased by 267% to 9,564 vehicles since 2000.

Governments have little incentive to further extend the B-double (and other high productivity vehicles) network if they don’t pay their way. The Business Council of Australia’s Infrastructure Roadmap for Reform (September 2007) recently concluded “We need to ensure that high productivity (that is, larger and longer travelling) trucks are charged appropriately. Not only will this help road/rail neutrality, it will facilitate having B Doubles and B Triples on our roads.” - (BCA 2007) http://www.bca.com.au/Content.aspx?ContentID=101167

Table 1: B-doubles under-recover their marginal cost of road use by $16,000 (based on the current fuel charge)

How will higher charges put downward pressure on freight costs?

Higher charges fund the growing road building program, leading to less congestion, quicker trip times, improved road safety and reduced wear and tear on trucks. More efficient freight movements will put downward pressure on freight costs. A failure to ensure cost recovery for bigger trucks is blocking nationally agreed productivity reforms. Higher productivity trucks can reduce freight costs by 30%.

The Impacts

What is the cost impact on truck operators?

Independent studies of livestock, linehaul, mining and bulk haulage operations show overall truck operating costs increase by up to 1.9%. B-double operating costs go up by between 2.3 and 3.9% (average 2.8%). Genuine cost increases, however, should be passed onto freight users and ultimately consumers.

Does this mean consumer goods prices will go up?

The impact on a $100 grocery bill ranges from 3 cents using semi-trailers to 13 cents using B-doubles – adding 0.5 cents to a $3 carton of milk. For stores in rural/remote Australia serviced entirely by B-doubles, the impact on a $100 grocery bill is 17 cents.

Responding to Industry Views

A number of issues were raised in 22 written submissions and at public forums held around Australia following the release of the draft Regulatory Impact Statement in July 2007. As a result of consultation, a number of changes were recommended to ATC.

More flexible multi-combination charges

Different charges for prime-movers used in multi-combinations can limit fleet flexibility. For example, a livestock transporter may want to use the same prime-mover for road train and B-double work; depending on road access to feedlots, abattoirs and sale yards.

NTC has shifted the emphasis of registration charges from the prime-mover to trailer axles. This ensures a fair outcome for modular high productivity vehicles such as B-triples and quad axle group combinations.

Increases phased-in over time

A three year phase-in period is recommended to assist the industry in negotiating cost increases. Following consultation, greater weighting was placed on the later years to allow the industry more time to adjust.

Using the latest road expenditure data

The latest road expenditure data has been included, which allows the increases to be phased-in and provides greater industry cost certainty. As a result, there will be no annual adjustment on 1 July, 2008 (the COAG implementation date for the revised charges).

Continued cost recovery

Heavy vehicle charges do not keep pace with increasing road expenditure because only one-third of the revenue base – registration fees – is adjusted each year. COAG directed that charges should ensure ongoing cost recovery. NTC has recommended the annual adjustment also applies to the fuel charge. An annual review will assess whether a new Determination is required.

A framework for enforcement

ATC charging principles allow for the recovery of costs associated with infrastructure use. NTC recommended the inclusion of some enforcement costs ($65 million).

NTC agreed with industry views that a more holistic approach to enforcement is required. A proposal for a national framework to collate and share information and intelligence data is being developed.

Will truck operators switch to running semi-trailers instead of B-doubles?

Road use charges per net tonne kilometre for B-doubles and road trains remain significantly lower than articulated and rigid trucks.

Table 2: Road use charges by net tonne-kilometre

Is the NTC calculation accurate?

The Productivity Commission independently audited and endorsed NTC’s charges methodology noting that it is “conservative” by international standards (i.e. resulting in lower charges).

The trucking industry claims the industry already pays its way

The Australian Trucking Association (ATA) has used its own methodology for calculating revenue to estimate an over-recovery of $132 million (compared to the $168 million under-recovery calculated by NTC). The industry’s own methodology breaches the ATC’s charging principles by including

a temporary excise on high sulphur diesel to encourage the take-up of low sulphur diesel, which is not related to infrastructure use and no longer applies
additional fuel excise paid by some metropolitan trucks (prior to 1 July 2006), which is not related to infrastructure use and no longer applies; and
indexation of the (fuel-based) road-user charge, which has actually reduced.

ATA also opposes the partial inclusion of enforcement costs (for overloaded trucks). The Productivity Commission inquiry had concluded that enforcement costs (for mass and speed) should be recovered.

What is the voting process?

Ministers vote on a schedule of recommended charges for truck and bus vehicle types. A simple majority is needed to approve the updated charges.

Is there a deadline?

COAG required the completion of the Charges Determination by the end of 2007. A deadline for implementation by governments was set for July 2008.

Downloads

Final Heavy Vehicle Charges Recommendation voted on by Transport Ministers in Canberra, 29th February 2008:

26th ATC Meeting Joint Communique - February 2008 (41.82 KB)

2007 Heavy Vehicle Charges Determination RIS Vol I - December 2007 (0.73 MB)

2007 Heavy Vehicle Charges Determination RIS Vol II Appendices - December 2007 (0.84 MB)

A Quick Guide to Heavy Vehicle Charges Fact Sheet - February 2008 (289.5 KB)

Schedule of Heavy Vehicle Registration Charges - February 2008 (83.48 KB)


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