COVID-19 has decimated public transport patronage and revenue in all Australian cities. The recovery period provides time for state and territory governments to re-think how they price and deliver sustainable public transport services. The report provides a roadmap for this, while highlighting the pitfalls of some populist pricing approaches.

Key points:

• Subsidising public transport is necessary because of its role as a human service that aims to provide affordable transport to most people. Subsidies can also be justified on efficiency grounds, not least because of their role in partially addressing road congestion and in meeting the large fixed costs of transport networks.
• However, most jurisdictions use relatively simple and ad hoc approaches to setting fares and subsidies, which do not systematically address either equity or efficiency goals. Fares often do not change from year to year or only increase with inflation.
• Consequently, public transport fares have become decoupled from costs, with the risk that governments’ budgetary comfort zones will be breached, jeopardising future service quality, which is the most important driver of patronage.
• Better pricing would recognise that peak charges should be higher and timed to make improved use of transport assets, prices should better reflect that buses are less costly than trains, and longer distances travelled should come with higher prices.
• At current subsidised levels, most people can afford public transport. However, concessions are inadequately targeted. Some people experiencing disadvantage cannot access concessional fares, while some high-income customers are eligible for generous discounts.