An Economic Framework for Traffic Planning in Greater Melbourne

Abstract. Economics-based policies are proposed for ameliorating Melbourne’s traffic congestion. A suite of direct and indirect demand-side strategies is suggested. This includes a cordon pricing scheme for the central city area, including the CBD, along with parking policies which address boundary problems on the cordon perimeter. Curb-side pricing of major arterials and of the two major ring-roads is proposed at short-run marginal cost rather than the current cost-recovery plus margin basis. This should be promoted along with ‘traffic calming ’ policies on smaller auxiliary urban roads to limit ‘rat-running ’ and promote urban environmental quality. Contracts on existing and proposed tollways should be renegotiated. Auxiliary public transport pricing reform is advocated with competition being promoted and fares related to marginal not average costs. Consequent higher transport sector deficits should be funded, in part, by revenues from congestion charges on roads. Policies of concentrating urban expansion on Melbourne’s boundary, where it is served by radial transport links, are criticised. Transport and urban planning policies are suggested for the city periphery, including the retention of greenbelt areas, along the lines of the State Government’s ‘Melbourne 2030 ’ policy of imposing strict city boundaries with development of new self-contained urban communities. The overall suite of policies proposed is a stop-gap which brings Melbourne’s congestion closer to efficient levels and facilitates an eventual transition to comprehensive electronic pricing