transport policy in context

DEPARTMENT OF THE TREASURY

Transport policy in context

Ken HenrySecretary to the Treasury

Canberra, 3 October 2002

2 DEPARTMENT OF THE TREASURY

Drivers of fiscal and economic performance


population sizepopulation size

age compositionage composition

demographydemography

DRIVERSDRIVERS

physical locationphysical location

ELEMENTSELEMENTS


financialfinancial

scientificscientific


technologytechnology

DRIVERSDRIVERS

industrialindustrial

ELEMENTSELEMENTS


tradetrade


international integrationinternational integration


DRIVERSDRIVERS

investmentinvestment

peoplepeople

ideasideas

diseasedisease

ELEMENTSELEMENTS


resource depletionresource depletion


international integrationinternational integration


environmental degradationenvironmental degradation

DRIVERSDRIVERS

physical amenityphysical amenity

salinitysalinity

climate changeclimate change

ELEMENTSELEMENTS


Population growth rate

0.0

0.5

1.0

1.5

2.0

2.5

60-61 63-64 66-67 69-70 72-73 75-76 78-79 81-82 84-85 87-88 90-91 93-94 96-97 99-00

0.0

0.5

1.0

1.5

2.0

2.5Per cent Per cent


Fertility rate

1.6

1.8

2.0

2.2

2.4

2.6

2.8

1972 1976 1980 1984 1988 1992 1996 2000

1.6

1.8

2.0

2.2

2.4

2.6

2.8

Replacement rate

Total fertility rate Total fertility rate


Net migration

0

20

40

60

80

100

120

140

160

180

200

1954 1959 1964 1969 1974 1979 1984 1989 1994 1999

0

20

40

60

80

100

120

140

160

180

200Persons ('000) Persons ('000)


Population growth rate projections

0.0

0.5

1.0

1.5

2.0

2.5

60-61 67-68 74-75 81-82 88-89 95-96 02-03 09-10 16-17 23-24 30-31 37-38

0.0

0.5

1.0

1.5

2.0

2.5Per cent Per cent

IGR projections


Population ageing

0

50

100

150

200

250

300

350

400

450

0 to 14 15 to 54 55 to 64 65 to 84 85+ Total

0

50

100

150

200

250

300

350

400

450

2002 2022 2042

Index value (2002 base=100) Index value (2002 base=100)


Annual GDP growth(Intergenerational Report projections)

-1

0

1

2

3

4

5

6

1990/91 1998/99 2006/07 2014/15 2022/23 2030/31 2038/39

-1

0

1

2

3

4

5

6Per cent Per cent

Forecasts

Medium Term Projections

Average of next 40 years


Components of GDP growth

ProductivityProductivity

Participation

Population

Employment (hours)

Employment (hours)

GDPGDP

Total populationTotal population

Share of population 15+Share of population 15+

Participation rateParticipation rate

Unemployment rateUnemployment rate

Average hours workedAverage hours worked

Capital deepening

Multifactor productivity


The three ‘Ps’ in Australia - past and future

-1

0

1

2

3

4

-1

0

1

2

3

4

Past Future

Percentage contribution Percentage contribution

PopulationPopulation ParticipationParticipationProductivityProductivity

2

7/8

-1/4 -3/8

2 13/4

33/4

21/4


Growth rates of GDP per capita - Australia past and future

-1

0

1

2

3

4

-1

0

1

2

3

4

Past Future

Percentage contribution Percentage contribution

Population growth

11/2

3/4

33/4

21/4

GDP growth

21/4

11/2

GDP per capita growth

less equals

Over 40 years, 3/4 percentage points a year compounds to a third.


Major components of budget cost

DriversDrivers

DemographyDemography

Average cost of programmes


+4¼% GDP+4¼% GDP

Impacts in 40 yearsImpacts in 40 years

HealthHealth1/4

?

1/4

?

3/4

?

3/4

?



Aged careAged care

DriversDrivers





+4¼% GDP+4¼% GDP

+1% GDP+1% GDP

HealthHealth



Payments to individuals


DriversDrivers





HealthHealth

Aged careAged care

+4¼% GDP+4¼% GDP

+1 GDP+1 GDP

+ ½ % GDP+ ½ % GDP



Education etcEducation etc

HealthHealth

Aged careAged care

+4¼% GDP+4¼% GDP

+1 GDP+1 GDP

+ ½% GDP+ ½% GDP

-½% GDP-½% GDP

DriversDrivers




Payments to Individuals

Payments to Individuals




HealthHealth

Aged careAged care

+4¼% GDP+4¼% GDP

+1 GDP+1 GDP

+ ½% GDP+ ½% GDP

-½% GDP-½% GDP

DriversDrivers







Education etcEducation etc

TotalTotal +5¼% GDP+5¼% GDP

Fiscal adjustmentFiscal adjustment


Policy choices

Faster GDP growthFaster GDP growth

Lower cost budget programmesLower cost budget programmes

Budget balance falls and debt increases

Budget balance falls and debt increases

11

Tax:GDP ratio increases

Tax:GDP ratio increases22

Policy responsePolicy response33

Pass the problem to future generations



Tax to GDP ratio required

-2

-1

0

1

2

3

4

5

6

2002-03 2041-42

-2

-1

0

1

2

3

4

5

6Per cent of GDP Per cent of GDP


Immigration policyImmigration policy

Fertility policy ?Fertility policy ?

Workforce participationWorkforce participation

UnemploymentUnemployment

Sound macro policy frameworks

Sound macro policy frameworks

Further micro reformFurther micro reform

Policies to grow GDP faster

PopulationPopulation

ParticipationParticipation

ProductivityProductivity


Productivity growth is crucial

0

0.5

1

1.5

2

2.5

3

3.5

1960s 1970s 1980s 1990s 2000s 2010s

0

0.5

1

1.5

2

2.5

3

3.5

Multi-factor productivity Capital deepening Labour productivity

Per cent Per cent

IGR projections

1/2 1/2


Another look at the framework

Agecomposition

Agecomposition

PhysicallocationPhysicallocation

Totalsize

Totalsize

ParticipationParticipation ProductivityProductivityPopulationPopulation GDPGDP


A framework for transport policy

Agecomposition

Agecomposition

PhysicallocationPhysicallocation

Totalsize

Totalsize

ParticipationParticipation ProductivityProductivityPopulationPopulation GDPGDP

Transport and other policy

Transport and other policy

Transport services need

(demand)

Transport services need

(demand)

Transport services delivery

Transport services delivery


Roads


Truck traffic

Non-bulk freightNon-bulk freight

Main DriversMain Drivers

Bulk FreightBulk Freight

Domestic supply

Domestic supply

Export demandExport demand

ImpactImpact

Exponential growth

Exponential growth

Inter-modal competitionInter-modal competition

GDPGDP

Physical locationPhysical location


PersonsPersons

Passenger traffic

saturationsaturation


Cars per personCars per person

Avge distance travelled


ImpactImpact

steadysteady

PopulationPopulation slowing growthslowing growth

Slowing growthSlowing growth


Exponential growth

Exponential growth

Exponential growth

Exponential growth

Implies growth of 50% over 15

years

Truck kms to grow 2.7% pa

Interstate to grow 75% over

15 years

Truck trafficBTRE projections 2000-15

Non-bulk freightNon-bulk freight


GDPGDP

Bulk FreightBulk Freight

Inter-modal CompetitionInter-modal Competition

Domestic Supply

Domestic Supply

Overseas growth

Overseas growth

ImpactImpact

3.25% pa


Passenger trafficBTRE projections 2000-15

Main DriversMain Drivers ImpactImpact

Slowing growthSlowing growthExponential

growthExponential

growth

Implies growth of 20% over 15

years

Urban car kms to grow 1.2% pa

23% including commercial

traffic

PersonsPersons

saturationsaturationCars per personCars per person


Avge distance travelled steadysteady

PopulationPopulation slowing growthslowing growth


Policy choice

Regulatory changeRegulatory change

Higher VFM budget programmesHigher VFM budget programmes

Urban congestionUrban congestion11

Degraded highwaysDegraded highways22

Policy responsePolicy response44



?Greenhouse ? Greenhouse ? 33

Higher productivityHigher productivity


Some dimensions of possible regulatory change

Modifying price signals confronting users (demand)

Modifying price signals confronting users (demand)

Congestion pricing in urban areas?Congestion pricing in urban areas?

Scope for moving user prices closer to social marginal cost?Scope for moving user prices

closer to social marginal cost?

Cost recovery regimes for heavy vehicles?Cost recovery regimes for heavy vehicles?

Improving systems for funding and managing new transport

infrastructure(supply)

Improving systems for funding and managing new transport

infrastructure(supply)

Income tax: s51AD, Div 16DIncome tax: s51AD, Div 16D

Part IIIA of the TPAPart IIIA of the TPA

Competition provisions of the TPACompetition provisions of the TPA

Scope for private provision?Scope for private provision?

Improved performance in inter-governmental provision

Improved performance in inter-governmental provision

Better intermodal linksBetter intermodal links

Transparency and accountability in SPPsTransparency and accountability in SPPs

AusLinkAusLink

Private Financing PrinciplesPrivate Financing Principles

DEPARTMENT OF THE TREASURY

Transport policy in context

Ken HenrySecretary to the Treasury

Canberra, 3 October 2002

transport policy in context

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