Toll giant: West Gate Tunnel price hikes will only match Bolte
Chair Lindsay Maxsted insists Transurban’s toll roads remain a short cut to value despite a flexible pricing deal for the West Gate Tunnel project.
Business
Don't miss out on the headlines from Business. Followed categories will be added to My News.
Transurban chair Lindsay Maxsted has defended the toll price structure for the West Gate Tunnel that allows the company to hike the price before the road opens.
Mr Maxsted says the pricing mechanism for the West Gate Tunnel is largely “academic” given the toll will simply match what is being charged at the Bolte Bridge.
“The toll will be whatever the toll is on the Bolte Bridge when the road opens,” he said on Thursday.
Tolls for the West Gate Tunnel project were first set in a 2015 contract with government, with a minimum fee of $2.75 and a peak-hour charge of $4.40.
However, the Herald Sun revealed earlier this week those tolls are subject to quarterly price hikes right up until the time the road opens.
Transurban is able to lift the tolls by 4.25 per cent a year until 2029 and in line with inflation after that.
Mr Maxsted said the price structure had been deliberately designed to ensure the West Gate Tunnel charge matched the Bolte Bridge to ensure motorists did not choose one over the other based on price.
“Both the government and us were very keen to have synergy with the toll over the Bolte Bridge and the toll for the (West Gate) tunnel so we don’t distort how people are using roads based on a differential in the price.
“That is all that is happening here.”
Speaking on the sidelines of Transurban’s annual meeting in Melbourne, Mr Maxsted said heavy use of the group’s tollways showed they were good value.
However, he said the company, which also owns CityLink, was acutely aware that its tolls were rising faster than inflation.
Mr Maxsted warned shareholders a “sluggish” economy was beginning to hit its roads as growth in the number of motorists opting to use them slowed.
“(Economic) activity is down — you see that in the borrowing levels from industry, from small to medium-sized business, and that is coming through in our numbers,” he said.
“It’s just a very sluggish economy.”
Mr Maxsted, who also chairs Westpac, said that while the economy was slowing, he did not see any signs of a recession on the horizon short of a major economic shock such as a rapid escalation in the US-China trade war.
A trading update showed average daily traffic in Melbourne increased by a slim 0.6 per cent to 860,000 transactions during the three months to September.
That compares with growth of 5.5 per cent during the same period a year earlier.
Workday traffic slid 0.2 per cent for the three months to September while weekend traffic rose 2 per cent.
In Sydney, traffic increased 2.1 per cent to 838,000 trips.
But excluding the new M4 toll road, which opened in July, traffic rose by just 0.1 per cent — its weakest growth since the global financial crisis.
Transurban said there had been a sharp drop-off in truck usage in Sydney.
The Melbourne-based company operates its toll roads under concession agreements with governments that allow it to continually lift the price.
For CityLink, it is able to hike the price by 4.25 per cent a year. That is well ahead of inflation, running at 1.6 per cent, and comes amid weak wage growth.
Mr Maxsted said the company paid close attention to the value its roads offered motorists, particularly given wage growth had been weak.
But ongoing traffic growth across the network — all of the company’s toll roads experienced usage growth in 2018-19 — showed motorists were willing to pay for the time savings the roads provided, he said.
“At the moment, it works but, over time, if there was a massive difference between average weekly earnings and the rates tolls are going up, then that would put pressure on the value proposition.
“We are very conscious of this … We don’t think it is anywhere near that at the moment because we do go out of our way, particularly with the technology we have these days, to explain to people this is a value proposition.
“Hop on CityLink to go to the airport as opposed to taking Mount Alexander Rd and we can save you 15 to 20 minutes. And people do that.”