Optimising traffic congestion requires a national approach to transport

But, this assumes that access to busy roads at peak times is free. Then, each driver experiences the average cost of congestion, but does not take into account his/her contribution to the problem and the resulting extra cost imposed on others. From a community perspective, key parts of the road system will be overused at peak times and congestion will be excessive. Congestion charges make drivers take into account the extra congestion costs they impose on others, and road-use at peak times falls accordingly.

It is important to note that elimination of traffic congestion is not a sensible policy objective. The appropriate aim is to reduce congestion to the optimal level. Reducing congestion any further adds more to social costs than to social benefits.

The key to reducing congestion to the optimal level is not just more road capacity, including "boring", or congestion charges only, or simply improvements to public transport. A combination of the three is required.

Congestion charges reduce the amount of road space required at peak times and facilitate more efficient use of existing and new road infrastructure. However, as population and incomes grow, road improvements will eventually provide a superior balance of social benefits and social costs than rising charges. Even in the short term, there will be many circumstances in which road expenditures provide a higher ratio of social benefits to social costs than other measures. For example, new orbital road and river-crossing capacity that takes through-traffic off congested radial roads will reduce congestion. Such capacity will also increase the effectiveness of congestion charges by increasing the availability and quality of alternatives to driving on congested radial roads to the CBD.

Because congestion charges will encourage a shift from cars to public transport, economically viable investments to increase capacity, reliability and convenience of services will complement congestion charges in tackling traffic jams. Savings from cutting subsidies to public transport that has become more viable could be applied to tax cuts or government programmes.

Economically justifiable, complementary road and public transport improvements should be in place when congestion charges are introduced. These improvements could be funded by debt to ensure timely availability. This is equitable because present and future users share the cost of the infrastructure. It is fiscally responsible because congestion charges provide funds to service the debt.

It is widely recognised that the existing tax on fuel artificially increases the cost of inputs to business activities, thereby interfering with production efficiency and reducing the total value of goods and services in the economy. Reduction of fuel tax to make room for congestion charges, which improve efficiency of resource-use, would reduce the adverse economic effects of the tax system as a whole.

Cutting fuel tax would also avoid higher imposts on the average motorist. This is politically important. The poorer sections of the community pay a higher proportion of their incomes in fuel tax for various reasons. Also, motorists generally resent the commonwealth government's allocation of just 16 per cent of fuel tax revenue to roads.

But, the Commonwealth wants to keep the rest for other purposes. So, the Commonwealth's AusLink Green Paper (November 2002) said congestion is a problem for state and local governments.

In December 2002, the National Transport Secretariat described congestion as a problem of national economic importance. The Commonwealth needs to be part of a solution, not an obstacle to one. Another challenge is looming for Australia's system of fiscal federalism.

Being trapped in traffic is "boring". If our three spheres of government fail to implement appropriate measures, perhaps we should try to make traffic congestion more enjoyable. Dr Anthony Downs of the Brookings Institution suggested acquiring a car with climate controlled air conditioning, a radio, CD player, hands-free phone, a fax machine, and a microwave oven. Also, we can drive to work with someone whose company we enjoy. Then, we can make traffic jams part of our leisure lives.