• Subsidising public transport is necessary because of its role as a human service that aims to provide affordable transport to most people. Subsidies can also be justified on efficiency grounds, not least because of their role in partially addressing road congestion and in meeting the large fixed costs of transport networks.
• However, most jurisdictions use relatively simple and ad hoc approaches to setting fares and subsidies, which do not systematically address either equity or efficiency goals. Fares often do not change from year to year or only increase with inflation.
• Consequently, public transport fares have become decoupled from costs, with the risk that governments’ budgetary comfort zones will be breached, jeopardising future service quality, which is the most important driver of patronage.
• Better pricing would recognise that peak charges should be higher and timed to make improved use of transport assets, prices should better reflect that buses are less costly than trains, and longer distances travelled should come with higher prices.
• Avoidable road congestion in Australia’s cities cost an estimated $24 billion in 2018-19 and, unless countered, will grow by an estimated 45 per cent by 2029-30. Lower public transport pricing partly assuages congestion, but road user charges are a much better solution for road congestion and would make peak pricing on public transport more effective for demand management. Judiciously applied parking levies would also help and can be introduced now.
• At current subsidised levels, most people can afford public transport. However, concessions are inadequately targeted. Some people experiencing disadvantage cannot access concessional fares, while some high-income customers are eligible for generous discounts.
• The disruption to public transport arising from COVID-19 provides a few years of breathing space for jurisdictions to re appraise pricing structures and levels, and to transition to new models. The NSW Independent Pricing and Regulatory Tribunal (IPART) and Infrastructure Victoria have already developed pricing approaches that could usefully be replicated — to varying degrees — in all jurisdictions.
• IPART, in particular, has a unique role in providing transparent rigorously-based pricing advice to the NSW Government. Other jurisdictions, particularly larger ones, could benefit from a similar arrangement.
• The temptation to lower prices in the period before a resumption of normality in public transport use would merely savage revenue by more and would be an ineffectual way of increasing patronage. Fear trumps a few dollars of ticket discounts.

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