Productivity Commission warns on public transport fare cuts

The Productivity Commission has warned against a ‘knee jerk’ reaction to the financial damage to the nation’s public transport systems in the wake of Covid-19.

Productivity Commission chairman Michael Brennan. Picture: James Croucher

The Productivity Commission has warned against a “knee jerk” reaction to the financial damage to the nation’s public transport systems in the wake of Covid-19 and the working from home revolution.

The commission has launched a study of public transport pricing by states and territories and the budgetary impacts on systems where use is likely to drop by as much as 30 per cent, even after people return to their city offices.

On Wednesday, commission chairman Michael Brennan said that it could take time for public transport to recover from the exodus of passengers due to Covid but it was important to “avoid desperate, knee-jerk reactions” such as radical fare reductions.

“That would be a very bad idea,” he told a seminar held to discuss the commission’s latest research paper, Working from Home.

Mr Brennan said public transport use had dropped by as much as 70 per cent when the pandemic began in March last year and this had been consistent.

In May this year, figures in Perth and Brisbane, which were in effect back to pre-Covid work arrangements, were still 30 per cent under usual traffic.

He said public transport was disproportionately affected by working from home trends because it was much more heavily used by knowledge workers than by other workers: about half of the capital city commutes on public transport were by professionals and managers.

While there was a “superficial attraction” in cutting fares it was not an effective way of increasing traffic, he said,

“We already recover a pretty low share of costs in Australia on public transport,” he said. “NSW recovers maybe 30 per cent of running costs, none of the capital costs, and most states are below that.

“When you look at who uses the system (it’s) not exactly the poorest member of society so you are talking about a bigger tax payer subsidy … and a lot of the benefit will be to those managers and professionals who are doing a daily commute.”

As well, studies on pricing suggested it did not make a big difference to the decision on whether to take public transport because other factors, such as time, came into the decision.

Mr Brennan said that the reduced use of public transport, which would likely continue to be driven by health fears, posed a budget challenge for the states and territories. But he warned against “easy answers” such as a reduction in services, saying that could cause more congestion on the roads.

The commission’s research paper is expected to be released in a few weeks.