Myth: Melbourne’s fares are comparatively cheap

Myth: Melbourne’s fares are comparatively cheap
Fact: Melbourne’s fares, once the most expensive overall in Australia, became cheaper for many trips after the introduction of the ‘Zone 1 cap’ in 2015. But they remain some of the most expensive for shorter trips, which account for the majority of day-to-day travel. Thanks to above-inflation fare rises over the last two decades, public transport for many such trips costs much more than petrol in the car. Whether or not the Zone 1 cap remains in future, the basic single-zone fare needs to reduce if public transport is to become competitive with car travel.

Most people who use public transport in Melbourne harbour no illusions about how expensive it can be, particularly for casual users (which most people are when they try public transport for the first time). While longer trips have become cheaper thanks to the ‘Zone 1 cap’ introduced in 2015, it remains true that over half of all trips are within a single zone, and there is little question that fares for these shorter trips need to drop in order to make public transport competitive for those who own cars. Proclaiming a ‘CBD free tram zone’ goes nowhere near the change that is required.

Yet the view is sometimes expressed that Melbourne’s fares are cheap even for short trips. Some commentators and bureaucrats appear to have convinced themselves that Melbourne’s system is among the best in the world and ought to be priced at a premium.

This notion can be dismissed quite easily. Some parts of Melbourne’s system work passably well, but on the whole, by world standards our system is atrocious. It’s because of the poor standard of service that the vast majority of Melburnians not only don’t use public transport, but have perfectly valid reasons for not using it. The inadequacies of Melbourne’s public transport are documented extensively on this page.

It’s not just those in officialdom who think Melbourne public transport is cheap: hence the need for this page. The following letter to The Age gives the gist of the argument:

The claim….that public transport is not competitive with car travel does not match my experience. An all-day public transport ticket to the city would cost me $12.60. If I drove the 100 kilometres round trip at a cost of 12.8¢ a kilometre, it would cost me $12.80. Adding standing costs at 7.6¢ a kilometre would bring the total cost to $20.40. Add in parking and you can see that public transport is cheap.

Add in depreciation and public transport is dirt cheap. But I still go by car because it is door-to-door, quicker and more convenient.

—Chris Curtis (Langwarrin), The Age, 29 June 2006

What this letter does quite well is set out the quite special conditions under which public transport is reasonably price-competitive with car travel (if still unattractive for other reasons). If you commute a long distance to work, and you pay for CBD parking, and you can avoid the need for a car (or additional car) by taking public transport to work, then it’s worth your while financially to use public transport.

Drop any of these conditions and any price advantage of public transport disappears; and for short trips in particular, it actually becomes more economical to drive than to use public transport with our relatively high basic fare. It’s the same problem that besets Adelaide, where the flat-fare system has long acted as a disincentive to making short trips by public transport.

Consider a return journey from the suburbs to some point within Zone 1, of say 10km each way (somewhat more than the median trip length in Melbourne). By car, using the highest petrol price seen in Melbourne to date, the fuel cost is roughly $3.00. The fare using Myki money is $7.80: two and a half times as much. If you do the same trip each working day for a year (allowing four weeks’ annual leave) the fuel cost by car is around $700, less than half the cost of a Myki pass that includes Zone 1. The difference easily covers the extra maintenance bills incurred by driving the car to work each day!

Factor in the fact that Melbourne’s public transport generally isn’t useful for non-work trips, and our public transport really starts to look like poor value for money indeed. Only the cost of CBD parking and the sheer hassle of driving a car in the inner city count against the car option, and even these disappear when the city centre is not the destination. Little wonder traffic congestion goes on increasing while public transport struggles to attract more than 10 per cent of the population.

Or as one would-be public transport user put it:

I thought seriously about using public transport to get to work. I figured that if it cost me 14 cents a kilometre just in fuel, a round trip of 30km would see a daily cost of $4.20 or $21 a week. I travel from Vermont to Hawthorn every weekday…. I priced the ticket of a daily zone 1 and 2 for ‘all day’ at $9.70, a weekly ticket for the same zones is $45.20. My verdict is that I am still $24.20 a week better off if I clog the roads with my vehicle, a small to medium-sized car which is near-new.

However, if you take into account the cost of registration, insurance, maintenance and the total cost of the car then public transport would be much cheaper. But you would need to pay these costs regardless, as the car still exists for use on the weekends. I performed some number crunching and the price of fuel would have to reach $2.88 a litre to be on par with the cost of my journey to work if I was to take public transport….

Lately I have watched the trams taking the same route to work as I do, I often pass them but mostly we stay side by side all the way to Hawthorn. From time to time, I think about getting on. But I stay in the comfort of my own vehicle, thinking about the overseas trip that I will be taking at the end of the year with $1258 I have saved by not taking public transport.

—David Kelly-Grimshaw, Herald Sun, 3 May 2006

(Naturally, the same person today would only have to pay the Zone 1 fare. But a weekly zone 1 fare is now almost $40, while car fuel costs are no greater than in 2006. Mr Kelly-Grimshaw is still $18 a week better off driving his car.)

Until 2008 it could safely be said that Melbourne had the highest fares in Australia for trips of comparable length, thanks to years of above-inflation fare rises both before and after privatisation. That distinction now belongs to Brisbane, which hiked its fares by a staggering 50 per cent over the five years between 2008 and 2013. But Melbourne has long led the world when it comes to the cost of urban public transport for typical trips.

As the following table shows, since 1990 Melbourne’s fares have increased faster than those in every other capital city, with the sole exception of the Brisbane fare hike post-2008. Importantly, Melbourne fares have also increased much faster than the cost of car travel, which actually declined in real terms after the tax changes in 2000 and again with the drop in global oil prices in 2009-10.

With more above-inflation fare rises being foreshadowed by the Victorian Government in future years, it’s not unlikely that before long Melbourne will again displace Brisbane as Australia’s most expensive city for public transport, at least for short and middle-distance trips.

Transport Consumer Price Indices
(based on 1990 = 100%)
1990 1995 2000 2005 2006 2007 2008 2010 2013
Melbourne Public Transport 100 159 172 221 232 240 247 260 299
Private Motoring 100 118 129 145 157 156 168 161 169
Sydney Public Transport 100 128 162 202 206 213 225 238 257
Private Motoring 100 116 131 147 157 156 167 159 168
Brisbane Public Transport 100 131 158 195 206 214 227 279 359
Private Motoring 100 116 128 144 155 156 168 168 175
Adelaide Public Transport 100 136 161 194 201 217 230 245 268
Private Motoring 100 121 131 150 162 162 174 166 175
Perth Public Transport 100 138 172 199 205 212 222 233 263
Private Motoring 100 121 130 145 157 160 170 165 169
Hobart Public Transport 100 129 155 198 208 212 218 247 265
Private Motoring 100 117 129 144 153 153 163 157 164
Canberra Public Transport 100 144 173 206 210 218 225 243 268
Private Motoring 100 121 135 143 157 156 167 159 169
Darwin Public Transport 100 116 149 182 191 193 203 203 250
Private Motoring 100 116 129 140 151 152 162 155 173
Australia CPI – all groups 100 116 126 148 154 158 165 173 185

Source: Australian Bureau of Statistics (June figures)

Notice that the trend for public transport costs to increase faster than motoring costs has persisted in every Australian city, defying all counter-trends such as the increase in petrol prices after 2005. Even in the 1990s, Melbourne’s public transport struggled to compete in price with 70 cents-a-litre petrol, but as the table shows, it’s only become less and less competitive with the passage of time.

For example, taking just the period from 2000 to 2013, the average cost of public transport in Melbourne increased by 74% in constant dollar terms, and by nearly 20% in real terms (that is, factoring in the growth in CPI). Over the same period, private motoring costs grew by just 31% in constant dollar terms, and fell by 11% in real terms. Running a car in Melbourne has become cheaper, at the same time as public transport has become more costly relative to other goods and services.

The Zone 1 cap has only partially compensated for this hike in public transport costs, and the saving will doubtless be eroded over time. Exactly the same happened with the abolition of Zone 3 in 2007: commuters from Zone 3 were granted travel on Zone 1/2 tickets for $46.60 (per 10-trip Metcard), yet this was still higher than the $46.00 cost of a Zone 1/2/3 10-trip Metcard just five years earlier in 2002. And as we see from the table, the overall increase from 2005 to 2007, including the effect of Zone 3 abolition, was still greater than in any city other than Adelaide.

Most recently, the idea that our public transport is cheap was argued in a blog post by commentator Alan Davies (who blogs as The Urbanist). Davies recited figures from a Federal Government report suggesting that the ‘variable cost’ to households of commuting by car is $63 per week in the inner city and $82 per week in the outer suburbs, while the cost of commuting by public transport is just $36 and $41 per week respectively. This however overlooks a number of difficulties with using the raw government (BITRE) figures:

  • The figures represent modelling results, not actual survey data. Accordingly they will be sensitive to the modelling assumptions used, which BITRE do not always make clear.
  • The figures do not compare apples with apples. Instead they compare spending on car commuting by households where travel to work is by car with spending on fares by households where travel to work is by public transport. It is a fact that people who currently go to work by public transport have different travel patterns to those who go to work by car – both regarding the location of workplaces and the typical distances travelled to get there. Davies calls attention to this toward the end of his post, but this point is of such importance to understanding the results that it should have been made up front.
  • Although the model does take actual results from the VISTA 2007 survey as its starting point, these results have been biased by restricting to working couple households with two children under 18. Compared with the population as a whole, this has important consequences for factors such as the number of days per week worked by adult household members, the nature of the work (hence range of most probable work locations), the choice of travel mode, and the incidence of side trips being counted as part of the commuting journey (particularly when this is by car).
  • The ‘car commuting’ costs include an attempt to account for incremental costs of tyres, servicing and repairs as well as fuel; costs which are subject to a large degree of uncertainty. There is also a significant allowance for parking costs, which many motorists do not pay at all – even in the inner suburbs. The inner-city car commuting cost excluding parking is $46 per week, which is much closer to the estimate for public transport commuting.
  • It is likely the ‘car commuting’ costs have been inflated by counting associated non-work travel. For example, BITRE’s methodology suggests that if the journey to work is combined with a school drop-off or supermarket run, the additional distance travelled will be counted as part of the ‘car commuting’ cost. And if person A goes to work by car but drives person B to the railway station first, the trip to the station will be added to the household’s ‘car commuting’ cost but not its ‘public transport commuting’ cost!
  • Finally, the public transport ‘marginal cost’ figures are themselves suspect. Though the results are restricted to working couple households, the $41 per week marginal cost of public transport fares is less than the $41.60 cost of one week’s Zone 2 travel for two people in 2012, and much less than the $51 cost of a week’s Zone 1+2 travel for a single person in 2012. BITRE also suggests the cost per day of public transport commuting across all inner city households is $9.43, yet the $36 weekly cost across just public transport using households is less than four times as much – suggesting that the average inner-city working household is made up solely of part-timers!

In short, given the evidence presented above and the difficulty of extracting like-for-like comparisons from the BITRE figures, it appears unlikely that replacing a specific journey by car with the same journey by public transport would really produce any cost saving, given that most households would keep hold of the car regardless.

Of course as Chris Curtis’ letter also reminds us, fares are only part of the public transport choice equation. Just as important – indeed, probably more important – are ‘convenience’ factors such as short waiting times, decent travel speeds, reliable and plentiful service, cleanliness, and friendly staff. This is why free public transport won’t work – one needs a good quality of service as well as competitive pricing.

International experience shows that public transport can be both convenient and cheap. The key to making this happen is to provide service that is attractive to full-fare passengers. Melbourne’s public transport service levels are unattractive to those with the option of car travel, and as a result public transport is neither convenient nor cheap. What it needs is a planning overhaul and competitive fares, not more excuses!

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Last modified: 4 January 2016