John Singleton with Bob HowardRip Van Australia (Stanmore: Cassell Australia, 1977), pp. 245-49, under the heading “Transport, Public”.

In recent State elections, in N.S.W. and Victoria, public transport has emerged as a major election issue. Public transport systems, particularly in Sydney, Melbourne, Brisbane and Canberra, have degenerated so far they now try the patience of even the most tolerant user.

Poor services, filthy facilities, breakdown, accidents, late arrivals, over-crowding, strike disruptions and huge losses are some of the problems these systems are plagued with. The N.S.W. Public Transport Commission last year (1975-76) chalked up a massive $240 million loss. Estimates for losses Australia wide reach $400 million, which is ten times what it was a mere four years previously.

Public transport services could well be the largest employers in Australia — even larger than the gargantuan Australia Post and Telecom. The N.S.W. Public Transport Commission has over 47,000 on its payroll, while the Victorian Railways employ another 24,000. This enormous size allows plenty of scope for the empire builders to get to work in its bureaucracy, and the Unions to wield their muscle.

Usage of public transport is down, and continuing to decline. Peter Samuel has quoted figures, in The Bulletin, that show a decline from 1122 million passengers in 1960 for the six State capitals to 948 million by 1970. As population growth over that period was around 30 per cent, this represented a per capita usage decline from 196 trips to 126 trips a year. Samuel predicted that this would be now well down below 100.1

Available evidence suggests overwhelmingly that fare reductions will not bring about sufficient increases in patronage to pay their way. Under Gough Whitlam the Federal Bureau of Transport Economics estimated that, at most, patronage would increase by one-half of one per cent for every one per cent reduction in fares. A one-third of one per cent increase is more likely. The N.S.W. Government still cut fares. To win votes. Not customers, or profits. It is not their money.

Four years of avoiding price increases by the Melbourne Tramway Board only managed to chalk up an annual loss of $21 million, whereas it had previously been profitable.

The situation of our public transport systems is the same as that of similar services in Great Britain and the U.S.A. It’s the same as exists in those countries for postal services as well, and for the same reasons. Our governments can call in consultants, seek reports, set up Royal Commissions, until they’re blue in the face. None of them will do any good, because they will all try to figure out a solution that solves the problems without changing the fundamental system. They will spend more millions of taxpayers money trying to come up with more efficient ways to run the bureaucracies, new equipment (like Sydney’s Eastern Suburbs Railway and Melbourne’s Underground disaster areas), or better technology, but the fundamental cause of the problems will remain untouched. That cause is very simple: it is the fact that these systems are government bureaucracies and not open, competitive, private companies.

Turning transport over to private enterprise without at the same time encasing it in a maze of regulations will solve our transport problems at one stroke. It would not do it immediately, but it would inevitably do it. Anything less than turning transport over to private enterprise is putting Band-Aids on sores. It might buy a little time, but it won’t solve any problems, because it does not touch the causes. At most, it suppresses some of the more annoying symptoms — temporarily. We have avoided this fundamental fact for years now, at the cost of increasing deficits and declining services. We can’t afford to let it go any longer.

Free market forces of supply and demand should be allowed to operate, to determine routes, timetables, transport type, and price. Bureaucratic decisions will not do this efficiently or accurately, and paradoxically, the closer they are to doing so the more unnecessary they become. As was the case with road tolls and parking fees, transport fares would be highest in peak periods and in high demand areas. This would help spread usage, decrease congestion, and have the secondary effect of benefiting the old, the young, the unemployed, the handicapped and students, who all tend to travel off-peak.

As we saw in the case presented for privately owned and operated roads, some, and possibly a lot of public transport, would be provided by both road, shop and other business owners. There would be economic incentives for all of these. Trade unions could do something constructive for a change and operate either “free” (paid for out of dues) or at least cut-price bus services for their members. Suburban shopping centres in particular would probably find it a distinct advantage to run local bus services to bring people into their business area.

If there were no government controls over what routes were set up, where the stops were, what the fares (if any) were or what sizes the buses were, services could and would spring up wherever there was a demand. A new area would be added to the small business field — the operation of small jitneys or mini-buses. These could fill in the gaps left by the larger main bus and rail routes and add additional strength to the main routes during peak periods. None of this is allowed to happen today. Some private bus services are provided, but they are severely regulated as to where they are allowed to go and stop, and what they charge.

We have a choice at the moment between a taxi or full size bus for public road transport. There must be ample space in the market for small mini-buses, to fill out the demand between these two. These mini-buses could follow fixed routes and timetables, or cruise freely and be radio controlled. The market would quickly determine what was or was not viable. All the government has to do is to let it happen.

As far as the government services themselves go, they should be all put up for sale. Until they are sold, sub-contracting should be used immediately for maintenance, traffic scheduling, and depot operations. Once more, private enterprise under the force of the profit motive, would bring a lot more efficiency, imagination and innovation to bear in all these fields. Bus lines could be made up of an operating company and a number of driver owned or at least privately owned buses, as taxi and transport companies now operate.

The closed field of taxi licences should be thrown open to anyone who wanted to set up in it. There should be no licensing, no government fare fixing or regulation. The market should be allowed to determine the fare level. The granting of taxi licences has set up a privileged coercive cartel which, as we have stated many times, is something government has the power, but not the right to do. A system of compensation should be worked out for existing taxi-plate holders, based on the purchase cost (or even market price — the cost would be tiny compared with the principle) of their plates, with the funds coming from the sale of other public transport facilities and equipment.

The railway system presents a slightly more complicated problem because of the high capital costs involved and the limited amount of track. Essentially, however, the process to be followed would be the same — de-regulate the system, allow competition, and as soon as possible, turn the service over to private enterprise. For a start, private companies should be allowed to lease track track time from the government and run their own trains. Rolling stock could either be bought new — here or overseas (and free of tariff) — or bought or leased from the government. Transport companies could construct special terminal facilities and run, for example, specialised container freight trains. Special trains could be constructed to carry wheat, sheep, cattle, wool, coal, iron ore, and, in many cases, carry one product exclusively. Signalling functions, and train scheduling could be sub-contracted. Some of the large computer companies would no doubt be eager to install and operate the necessary equipment. Needless to say, once again the profit motive would ensure more efficiency, imagination and innovation, were brought to the task — particularly with private enterprise trains running.

Maintenance of track and government rolling stock could be sub-contracted. At the moment, it appears very little (if any) preventative maintenance is carried out on the N.S.W. rail system. All track should be put up for sale and sold as buyers became available. Contracts of sale would have to include clauses (permanent or temporary, depending on circumstances) guaranteeing access of trains to the track, is small sections were sold off.

Fares and freight rates should be set on normal commercial principles. Space over city railway lines could be sold for road expressway construction, saving the necessity for land resumption.

This only provides a quick sketch of some of the possibilities of a private enterprise transport system. What we have to bear in mind is that, whether the service is government run or privately run, we pay for it. Under the government service, we pay indiscriminately, that is, whether we use it or not, because of the huge amounts of tax money that are spent on transport every year. If we have to pay for it anyway it makes sense to ensure that the amount we pay is as small as possible. Commonsense and hard, bitter experience both show that the cost of privately operated services is smaller than that of government services. Private services also provide a more varied, efficient and relevant service, because they are constantly being tailored to consumer needs, rather than running in accordance with bureaucratic traditions.

Wherever there is a need, there is an opportunity for someone to make money. Private enterprise public transport systems would answer that need, in terms of quantity, quality, type and price. Bureaucracy, as we have seen, does not, cannot, and will not.

Further reading for Economics.org.au readers

— Mark Tier, “Sell Government Transport,” Quadrant, September, 1975, pp. 93-96.
— Bob Howard, “The Discipline of Necessity,” The Optimist, July-August, 1985, p. 9.

Footnote
  1. Peter Samuel, “Public Transport Shambles,” The Bulletin, 24 April 1976.