URGENT UPDATE: The Productivity Commission has just announced a bold proposal for a national road user charge aimed at funding essential infrastructure upgrades across Australia. This call to action comes as officials highlight the need for electric vehicle (EV) drivers to contribute to road maintenance, a critical step given that they currently avoid the 51.6 cents per liter fuel excise imposed on traditional fuel users.
This escalating demand for reform is outlined in the Commission’s latest analysis of the National Competition Policy, part of a series of reports delivered to Jim Chalmers ahead of the upcoming Economic Reform Roundtable later this month. The push for a national road user charge seeks to ensure that all vehicle types contribute fairly to road maintenance, particularly as the number of electric vehicles on Australian roads continues to surge.
The Commission’s report emphasizes, “Road infrastructure should be funded through user charges that reflect the efficient cost of providing and maintaining that infrastructure.” It argues that this approach will incentivize drivers to use roads more efficiently while also guiding infrastructure providers in assessing necessary changes to road capacity.
Following a High Court ruling that overruled the Victorian government’s attempt to impose a 2 cents per kilometer charge on EV drivers, the report calls for immediate national reforms. The Commission states that the growth in electric vehicles should serve as “added impetus” for this urgent change.
The final report is set to be presented to the Treasurer in late October, raising expectations for a significant policy shift. The Productivity Commission noted, “The decision of the High Court rules out state-based distance road user charges and means governments need to consider a national approach to road funding.” This opens the door to a more cohesive, less fragmented system that better reflects the true costs of road infrastructure.
In a related development, the Commission has urged the federal government to reconsider existing subsidies for EVs, such as the fringe benefits tax exemption for electric cars and plug-in hybrids. Instead, it advocates for the New Vehicle Efficiency Standard to become the primary tool for promoting cleaner vehicles on Australian roads.
Although Chalmers has previously mentioned that there are no immediate plans to tax EV users, he acknowledged ongoing discussions with stakeholders. “Over time, the use of fossil fuels in our car fleets will come down, and EV use will go up,” he stated in July, highlighting the shifting dynamics of the automotive landscape.
Meanwhile, at the state level, the New South Wales government has already indicated plans for a distance-based charge for eligible EVs, which is set to take effect on July 1, 2027, or when electric vehicles account for 30 percent of all new vehicle sales.
The Productivity Commission’s recent analysis also identifies the potential for aligning Australian regulations with overseas standards, estimating a possible boost to GDP of up to 0.2 percent annually, translating to between $1.9 billion and $3.8 billion. Moreover, reforms in occupational licensing could facilitate worker mobility across states, potentially enhancing GDP by between $5 billion and $10 billion.
As these discussions unfold, the impact on drivers, the economy, and the future of transportation in Australia remains significant. The urgency for a national road user charge has never been clearer, and all eyes are on the government to act swiftly and decisively.
