The Economics of Road Congestion: Analysis and Solutions for Australia

This essay provides an overview of road congestion issues in Australia, highlighting the economic costs, environmental impacts, and potential policy solutions. It begins by establishing the severity of the problem, noting Australia's high ranking in traffic congestion and the associated avoidable costs. The essay then delves into the causes of congestion, including economic success, population growth, infrastructure lags, and traffic incidents. It utilizes economic theory, specifically the concepts of marginal private cost (MPC), marginal social cost (MSC), and externalities, to analyze the inefficiencies caused by congestion. The essay further discusses the role of public transportation in mitigating congestion and explores policy options such as congestion charges, fuel taxes, improved public transport, and building more roads. The essay concludes by emphasizing the need for comprehensive strategies to address road congestion and improve the overall quality of life and economic productivity in Australia. Desklib provides this essay and many other resources to assist students in their academic pursuits.

Running head: ROAD CONGESTION IN AUSTRALIA
Road congestion in Australia
Name of the student
Name of the university
Author note

MSC
MPC
D
F
0
F
1 F2
P
a
B
C
ROAD CONGESTION IN AUSTRALIA
Overview of the issues associated with the road congestion
The traffic congestion in the roads of Australia has increased the travel time by twenty eight
percent. Australia ranks second in terms of traffic congestion. It has been estimated that the avoidable
cost of congestion in Australia is nearly around $16.5 billion. Traffic congestion is one of the major
problem faced by the citizens of New Zealand and Australia. One of the main reason behind the huge
congestion in Australia is due to its economic success and the growing population. There is an
increase in congestion in places where infrastructure has lagged growth and also in those places
where the development of roads and public transport have not been integrated in the city plans. There
is also no possibility for zero congestion in both Australia and New Zealand. Road congestion can
also hamper the quality of life of several people in Australia. As the aggregate demand for transport
has increased, the road congestion has increased in huge level (Anwar, Liu & Hoogendoorn, 2016).
There has been several impact with respect to congestion. One of them is the environmental impact
which states that it can cause air pollution and also increases the emission of carbon di oxide. This
results in worsening of traffic flow. Rise in air pollution as a result of more vehicles plying on road can
cause serious health issues. Also, non -productive waiting time in traffic can decrease the overall
productivity and can cause negative impact on the economic growth. There are also various causes of
congestion, one of which is the traffic incidents. Traffic accidents or failure of signals can cause huge
road congestions. Imbalance of demand and supply also causes huge traffic congestion. When there
is presence of more vehicles on the road, given the capacity of the road, it will lead to increase in
traffic volumes (Grote et al, 2016). Weather can affect the congestion in road as due to precipitation
road accidents may take place along with failure of signal. Precipitation also results in traffics and in
this way can cause lot of road congestion.
Analysis of road congestion
Congestion can result when the time of journey taken by the users are in excess of the normal
expectations. Congestion results when there is a presence of too many cars in too less space in the
road. Air pollution usually is the major externality
Fig: Externality due to traffic congestion

ROAD CONGESTION IN AUSTRALIA
(Source: Pearce & Pinto, 2015)
The issues which involves the traffic congestion can be explained with the help of economic
theory. The above figure shows relationship between the flow of traffic and the cost of travel within a
particular route. The market failure which results due to traffic congestion is been shown in the above
diagram. The unregulated cost is termed as marginal private cost (MPC). This cost refers to the fuel
costs, repair and maintenance cost along with the time taken by the driver and passengers. Since
road is termed as a common property, all the road users faces the similar average social cost (ASC).
Here the average social cost is equal to the marginal private cost. When there is presence of low
flows, car drivers can travel at the free flow speed. At that time the marginal private cost will remain
constant. As the road congestion rises, there will be decrease in speed and the marginal private cost
will slope upwards (Hensher, 2017). Road networks are termed as common property and common
property has two main characteristics. One is that the use of one agent will affect the use by others
and the use of resources will be restricted to a number of agents. When the demand curve is added to
the diagram it will represent the marginal private benefit of traffic (MPB). The marginal private benefit
can also be termed as marginal social benefit on the demand curve. In this following article it has
been assumed that while making a journey, road congestion is the only externality present there
(Grote et al, 2016). When there will rise in traffic above the point F0, it will result to road congestion
and three will be also presence of divergence between marginal social costs (MSC) and Marginal
private cost (MPC). Here, in the above diagram the marginal social cost will be equal to marginal
private cost along with social cost of congestion. The MSC takes into account the cost of congestion
imposed by the last road user on others. When the volume of traffic will increase, the MSC will divert
MPC. Here F0 is termed traffic free flow volume. The marginal external congestion cost is the
difference between the marginal social cost and the marginal private cost. There is a presence of
unregulated equilibrium where the MPC and the MSB intersects. The additional road user will then
face average social cost curve and the test of the users will have to face an extra cost in terms of their
extra journey. The area which is present under the demand curve is known to be the total social
benefits and the area which is present under the marginal private cost curve is represented by the
social cost. Here the triangle abc is the deadweight loss.
Public transportation has always played a very important role in case of mobility in the urban
areas. People in modern cities are very much dependent on the automobiles. Although the peak
period occupy only a particular part of a day, a very huge amount of people travel at this particular
point of time. Public transportation therefore have the have a great potential to affect the peak period
of the day. Road congestion takes place when travel demand exceeds the capacity of the road
system. Congestion therefore can be termed as a condition where the number of automobiles which
uses the road at any point of time is greater than the ability of the roads to carry the load at an
acceptable service levels. Traffic congestion is a huge urban transportation problem. Huge
dependence on automobiles is also one of the huge aspects of urban travel in modern cities
especially in countries like United States, Australia and Canada. Road congestion in Australia cost
$3.5 billion a year (Pearce & Pinto, 2015). The road congestion in Australia has also increased by
twenty eight percent. It can be said that technology can help the commuters to navigate a faster route.
Policies to reduce congestion
There are presence of several ways through which the road congestion can be reduced. The
automotive transportation has been the largest sectors in the US economy and therefore has
numerous social benefits. Some of the policies which can reduce traffic congestion includes taxes
related to fuel and vehicle, charges related to congestion, emissions fees and subsidies.
i) A congestion charge: The congestion charges are the fees which are levied on vehicles that are
often used in large cities. The primary goal of the congestion charge and tax is to speed the traffic
flow in traffic congested area. He congestion charge will reduce vehicle emissions and lower the
consumption of fuel. According to a report it has been found out that the congestion charge has
reduced the trips on those particular roads with more than fifty percent of the public shifting to the
public transportation (City-wide trial shows how road use charges can reduce traffic jams, 2018). Fuel
tax is another kind of tax which is used to pay for the maintenance of roads and also for other
services. When gasoline will be taxed consumption will go down by fifty seven percent.

ROAD CONGESTION IN AUSTRALIA
ii) Improving transport substitutes: public transportation can help in reducing road congestion in
many ways. It does more than improving the flow of traffic. Therefore, it can be said that public
transportation can relieve traffic congestion. When people starts using more public transport instead
of using their private cars, the number of vehicles plying in the road also reduces which in term
reduces road congestion. Public transport will also provide both economic and social benefits. Public
transportation also help in boosting economic performance. There are several benefits of public
transportation which means proving economic benefits to the community and most importantly will
reduce road congestion.
iii) Building more roads: building more roads or highways can reduce traffic congestion. As building
highways will encourage more people in building highways, therefore people will avoid using those
roads where the traffic usually remains heavy. The government has to spend a huge amount of
money for building roads although the huge capacity of road will reduce road congestion to some
extent.

ROAD CONGESTION IN AUSTRALIA
Reference list
Anwar, T., Vu, H. L., Liu, C., & Hoogendoorn, S. P. (2016). Temporal tracking of congested partitions
in dynamic urban road networks. Transportation Research Record: Journal of the
Transportation Research Board, (2595), 88-97.
City-wide trial shows how road use charges can reduce traffic jams. (2018). Retrieved from
http://theconversation.com/city-wide-trial-shows-how-road-use-charges-can-reduce-traffic-
jams-86324
Grote, M., Williams, I., Preston, J., & Kemp, S. (2016). Including congestion effects in urban road
traffic CO2 emissions modelling: do local government authorities have the right options?.
Transportation Research Part D: Transport and Environment, 43, 95-106.
Guzman, W., Young, L., & Peszynski, K. (2015, February). Departure side platforms: a road
congestion mitigation measure. In 33rd Australian Institutes of Transport Research
Conference (CAITR 2015), Melbourne University, Melbourne, Australia (pp. 12-13).
Hensher, D. A. (2017). Tackling road congestion–what might it look like in the future?.
Paramita, P., Zheng, Z., Haque, M. M., Washington, S., & Hyland, P. (2018). User satisfaction with
train fares: A comparative analysis in five Australian cities. PloS one, 13(6), e0199449.
Pasquale, C., Papamichail, I., Roncoli, C., Sacone, S., Siri, S., & Papageorgiou, M. (2015). Two-class
freeway traffic regulation to reduce congestion and emissions via nonlinear optimal control.
Transportation Research Part C: Emerging Technologies, 55, 85-99.
Pearce, P., & Pinto, D. (2015). An evaluation of the case for a congestion tax in Australia. The Tax
Specialist, 18(4), 146-153.
Reducing congestion | Brisbane City Council. (2018). Retrieved from
https://www.brisbane.qld.gov.au/traffic-transport/reducing-congestion
Stubbs, P.C., Tyson, W.J. and Dalvi, M.Q., 2017. Transport economics. Routledge.
The role of walking and cycling on urban congestion | Cycling Infrastructure | Traffic. (2018).
Retrieved from https://www.scribd.com/document/336255471/The-role-of-walking-and-
cycling-on-urban-congestion
Truong, L. T., De Gruyter, C., Currie, G., & Delbosc, A. (2017). Estimating the trip generation impacts
of autonomous vehicles on car travel in Victoria, Australia. Transportation, 44(6), 1279-1292.
Yue, J. S., Mandayam, C. V., Merugu, D., Abadi, H. K., & Prabhakar, B. (2015). Reducing road
congestion through incentives: a case study.