Australia / Analyst Insights
Rising traffic congestion drives funding for public transport

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by Karlson Sidhu
Oct 24 2017

Australia’s population growth has brought more traffic to our roads, with a growing number of people commuting within our burgeoning cities. This is putting pressure on governments to invest in and expand Australia’s public transport networks. Government support for public transport networks is expected to increase over the next five years. This is indicated by the approval of the second-stage of the G:Link light rail in the Gold Coast, Queensland, operated by Keolis Downer, and the current expansion to the Sydney light rail network, operated by Transdev. In September 2017, Keolis Downer also had its contract renewed to operate Yarra Trams, with the Victorian Government imposing tougher performance standards as part of the renewal.

Because the revenue generated by fares and fines does not cover the operating costs for transport industries, growth in public transport networks is heavily dependent on government investment and subsidies. Increasing demand and funding for public transport is expected to contribute to 2.8% revenue growth in the urban bus and tramway transport industry in 2017-18. Major player Keolis Downer’s revenue is expected to increase by 5.0% in 2017-18, to reach $851.5 million, while Transdev Australasia’s revenue is expected to grow by 4.0%, to reach $639 million. The strong growth of these companies is largely due to them securing recent government contracts. For example, Keolis secured the second stage of the G:Link tramway (as part of a joint venture), as well as locking in a 10-year contract to operate Australia’s first integrated multi-modal transport system in Newcastle. Meanwhile, Transdev has opened new bus depots in Heatherton, Thomastown and Sunshine West.

Worsening traffic conditions are encouraging people to use public transport more frequently, especially during peak hour. This increased demand is bringing solid growth to Australia’s public transport networks. The cost of parking in CBD areas, coupled with rising petrol prices, is also pushing up demand for public transport. Bus patronage to suburbs outside of the CBD is also increasing, as local service businesses grow. This has led to extra services being added to suburban bus routes in most cities. For example, in June 2017, the NSW Government announced it would be financing an additional 3,300 bus services a week.

Despite the costs of driving, projected motor vehicle usage trends indicate that car usage will continue growing and lead to more road congestion. Although state governments have built and expanded roads to alleviate congestion, the Downs-Thomson Paradox indicates that this only brings short-term relief to the problem. The paradox asserts that as car travel quality improves, people flock to the roads until congestion is as bad as or worse than before. As a result, the addition of new roads and more cars is unlikely to negatively affect demand for public transport services in the long term.

Related companies:

Keolis Downer Pty Ltd

Transdev Australasia Pty Ltd