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DEPARTMENT OF THE TREASURY
Transport policy in context
Ken HenrySecretary to the Treasury
Canberra, 3 October 2002
2 DEPARTMENT OF THE TREASURY
Drivers of fiscal and economic performance
3 DEPARTMENT OF THE TREASURY
population sizepopulation size
age compositionage composition
demographydemography
DRIVERSDRIVERS
physical locationphysical location
ELEMENTSELEMENTS
4 DEPARTMENT OF THE TREASURY
financialfinancial
scientificscientific
demographydemography
technologytechnology
DRIVERSDRIVERS
industrialindustrial
ELEMENTSELEMENTS
5 DEPARTMENT OF THE TREASURY
tradetrade
demographydemography
international integrationinternational integration
technologytechnology
DRIVERSDRIVERS
investmentinvestment
peoplepeople
ideasideas
diseasedisease
ELEMENTSELEMENTS
6 DEPARTMENT OF THE TREASURY
resource depletionresource depletion
demographydemography
international integrationinternational integration
technologytechnology
environmental degradationenvironmental degradation
DRIVERSDRIVERS
physical amenityphysical amenity
salinitysalinity
climate changeclimate change
ELEMENTSELEMENTS
7 DEPARTMENT OF THE TREASURY
Population growth rate
0.0
0.5
1.0
1.5
2.0
2.5
60-61 63-64 66-67 69-70 72-73 75-76 78-79 81-82 84-85 87-88 90-91 93-94 96-97 99-00
0.0
0.5
1.0
1.5
2.0
2.5Per cent Per cent
8 DEPARTMENT OF THE TREASURY
Fertility rate
1.6
1.8
2.0
2.2
2.4
2.6
2.8
1972 1976 1980 1984 1988 1992 1996 2000
1.6
1.8
2.0
2.2
2.4
2.6
2.8
Replacement rate
Total fertility rate Total fertility rate
9 DEPARTMENT OF THE TREASURY
Net migration
0
20
40
60
80
100
120
140
160
180
200
1954 1959 1964 1969 1974 1979 1984 1989 1994 1999
0
20
40
60
80
100
120
140
160
180
200Persons ('000) Persons ('000)
10 DEPARTMENT OF THE TREASURY
Population growth rate projections
0.0
0.5
1.0
1.5
2.0
2.5
60-61 67-68 74-75 81-82 88-89 95-96 02-03 09-10 16-17 23-24 30-31 37-38
0.0
0.5
1.0
1.5
2.0
2.5Per cent Per cent
IGR projections
11 DEPARTMENT OF THE TREASURY
Population ageing
0
50
100
150
200
250
300
350
400
450
0 to 14 15 to 54 55 to 64 65 to 84 85+ Total
0
50
100
150
200
250
300
350
400
450
2002 2022 2042
Index value (2002 base=100) Index value (2002 base=100)
12 DEPARTMENT OF THE TREASURY
Annual GDP growth(Intergenerational Report projections)
-1
0
1
2
3
4
5
6
1990/91 1998/99 2006/07 2014/15 2022/23 2030/31 2038/39
-1
0
1
2
3
4
5
6Per cent Per cent
Forecasts
Medium Term Projections
Average of next 40 years
13 DEPARTMENT OF THE TREASURY
Components of GDP growth
ProductivityProductivity
Participation
Population
Employment (hours)
Employment (hours)
GDPGDP
Total populationTotal population
Share of population 15+Share of population 15+
Participation rateParticipation rate
Unemployment rateUnemployment rate
Average hours workedAverage hours worked
Capital deepening
Multifactor productivity
14 DEPARTMENT OF THE TREASURY
The three ‘Ps’ in Australia - past and future
-1
0
1
2
3
4
-1
0
1
2
3
4
Past Future
Percentage contribution Percentage contribution
PopulationPopulation ParticipationParticipationProductivityProductivity
2
7/8
-1/4 -3/8
2 13/4
33/4
21/4
15 DEPARTMENT OF THE TREASURY
Growth rates of GDP per capita - Australia past and future
-1
0
1
2
3
4
-1
0
1
2
3
4
Past Future
Percentage contribution Percentage contribution
Population growth
11/2
3/4
33/4
21/4
GDP growth
21/4
11/2
GDP per capita growth
less equals
Over 40 years, 3/4 percentage points a year compounds to a third.
16 DEPARTMENT OF THE TREASURY
Major components of budget cost
DriversDrivers
DemographyDemography
Average cost of programmes
Average cost of programmes
+4¼% GDP+4¼% GDP
Impacts in 40 yearsImpacts in 40 years
HealthHealth1/4
?
1/4
?
3/4
?
3/4
?
17 DEPARTMENT OF THE TREASURY
Major components of budget cost
Aged careAged care
DriversDrivers
DemographyDemography
Average cost of programmes
Average cost of programmes
Impacts in 40 yearsImpacts in 40 years
+4¼% GDP+4¼% GDP
+1% GDP+1% GDP
HealthHealth
18 DEPARTMENT OF THE TREASURY
Major components of budget cost
Payments to individuals
Payments to individuals
DriversDrivers
DemographyDemography
Average cost of programmes
Average cost of programmes
Impacts in 40 yearsImpacts in 40 years
HealthHealth
Aged careAged care
+4¼% GDP+4¼% GDP
+1 GDP+1 GDP
+ ½ % GDP+ ½ % GDP
19 DEPARTMENT OF THE TREASURY
Major components of budget cost
Education etcEducation etc
HealthHealth
Aged careAged care
+4¼% GDP+4¼% GDP
+1 GDP+1 GDP
+ ½% GDP+ ½% GDP
-½% GDP-½% GDP
DriversDrivers
DemographyDemography
Average cost of programmes
Average cost of programmes
Payments to Individuals
Payments to Individuals
Impacts in 40 yearsImpacts in 40 years
20 DEPARTMENT OF THE TREASURY
Major components of budget cost
HealthHealth
Aged careAged care
+4¼% GDP+4¼% GDP
+1 GDP+1 GDP
+ ½% GDP+ ½% GDP
-½% GDP-½% GDP
DriversDrivers
DemographyDemography
Average cost of programmes
Average cost of programmes
Impacts in 40 yearsImpacts in 40 years
Payments to individuals
Payments to individuals
Education etcEducation etc
TotalTotal +5¼% GDP+5¼% GDP
Fiscal adjustmentFiscal adjustment
21 DEPARTMENT OF THE TREASURY
Policy choices
Faster GDP growthFaster GDP growth
Lower cost budget programmesLower cost budget programmes
Budget balance falls and debt increases
Budget balance falls and debt increases
11
Tax:GDP ratio increases
Tax:GDP ratio increases22
Policy responsePolicy response33
Pass the problem to future generations
Pass the problem to future generations
22 DEPARTMENT OF THE TREASURY
Tax to GDP ratio required
-2
-1
0
1
2
3
4
5
6
2002-03 2041-42
-2
-1
0
1
2
3
4
5
6Per cent of GDP Per cent of GDP
23 DEPARTMENT OF THE TREASURY
Immigration policyImmigration policy
Fertility policy ?Fertility policy ?
Workforce participationWorkforce participation
UnemploymentUnemployment
Sound macro policy frameworks
Sound macro policy frameworks
Further micro reformFurther micro reform
Policies to grow GDP faster
PopulationPopulation
ParticipationParticipation
ProductivityProductivity
24 DEPARTMENT OF THE TREASURY
Productivity growth is crucial
0
0.5
1
1.5
2
2.5
3
3.5
1960s 1970s 1980s 1990s 2000s 2010s
0
0.5
1
1.5
2
2.5
3
3.5
Multi-factor productivity Capital deepening Labour productivity
Per cent Per cent
IGR projections
1/2 1/2
25 DEPARTMENT OF THE TREASURY
Another look at the framework
Agecomposition
Agecomposition
PhysicallocationPhysicallocation
Totalsize
Totalsize
ParticipationParticipation ProductivityProductivityPopulationPopulation GDPGDP
26 DEPARTMENT OF THE TREASURY
A framework for transport policy
Agecomposition
Agecomposition
PhysicallocationPhysicallocation
Totalsize
Totalsize
ParticipationParticipation ProductivityProductivityPopulationPopulation GDPGDP
Transport and other policy
Transport and other policy
Transport services need
(demand)
Transport services need
(demand)
Transport services delivery
Transport services delivery
27 DEPARTMENT OF THE TREASURY
Roads
28 DEPARTMENT OF THE TREASURY
Truck traffic
Non-bulk freightNon-bulk freight
Main DriversMain Drivers
Bulk FreightBulk Freight
Domestic supply
Domestic supply
Export demandExport demand
ImpactImpact
Exponential growth
Exponential growth
Inter-modal competitionInter-modal competition
GDPGDP
Physical locationPhysical location
29 DEPARTMENT OF THE TREASURY
PersonsPersons
Passenger traffic
saturationsaturation
Main DriversMain Drivers
Cars per personCars per person
Avge distance travelled
Avge distance travelled
ImpactImpact
steadysteady
PopulationPopulation slowing growthslowing growth
Slowing growthSlowing growth
30 DEPARTMENT OF THE TREASURY
Exponential growth
Exponential growth
Exponential growth
Exponential growth
Implies growth of 50% over 15
years
Truck kms to grow 2.7% pa
Interstate to grow 75% over
15 years
Truck trafficBTRE projections 2000-15
Non-bulk freightNon-bulk freight
Main DriversMain Drivers
GDPGDP
Bulk FreightBulk Freight
Inter-modal CompetitionInter-modal Competition
Domestic Supply
Domestic Supply
Overseas growth
Overseas growth
ImpactImpact
3.25% pa
31 DEPARTMENT OF THE TREASURY
Passenger trafficBTRE projections 2000-15
Main DriversMain Drivers ImpactImpact
Slowing growthSlowing growthExponential
growthExponential
growth
Implies growth of 20% over 15
years
Urban car kms to grow 1.2% pa
23% including commercial
traffic
PersonsPersons
saturationsaturationCars per personCars per person
Avge distance travelled
Avge distance travelled steadysteady
PopulationPopulation slowing growthslowing growth
32 DEPARTMENT OF THE TREASURY
Policy choice
Regulatory changeRegulatory change
Higher VFM budget programmesHigher VFM budget programmes
Urban congestionUrban congestion11
Degraded highwaysDegraded highways22
Policy responsePolicy response44
Pass the problem to future generations
Pass the problem to future generations
?Greenhouse ? Greenhouse ? 33
Higher productivityHigher productivity
33 DEPARTMENT OF THE TREASURY
Some dimensions of possible regulatory change
Modifying price signals confronting users (demand)
Modifying price signals confronting users (demand)
Congestion pricing in urban areas?Congestion pricing in urban areas?
Scope for moving user prices closer to social marginal cost?Scope for moving user prices
closer to social marginal cost?
Cost recovery regimes for heavy vehicles?Cost recovery regimes for heavy vehicles?
Improving systems for funding and managing new transport
infrastructure(supply)
Improving systems for funding and managing new transport
infrastructure(supply)
Income tax: s51AD, Div 16DIncome tax: s51AD, Div 16D
Part IIIA of the TPAPart IIIA of the TPA
Competition provisions of the TPACompetition provisions of the TPA
Scope for private provision?Scope for private provision?
Improved performance in inter-governmental provision
Improved performance in inter-governmental provision
Better intermodal linksBetter intermodal links
Transparency and accountability in SPPsTransparency and accountability in SPPs
AusLinkAusLink
Private Financing PrinciplesPrivate Financing Principles
DEPARTMENT OF THE TREASURY
Transport policy in context
Ken HenrySecretary to the Treasury
Canberra, 3 October 2002