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TRAFFIC CONGESTION IN BRISBANE Economics Analysis

| Chris Boulis 1

In recent times, congestion in Brisbane has been on a rise and Brisbane City Council (BBC) is committed to reducing congestion across the city road network (Brisbane City Council, 2018). This essay will be detailing the issue on congestion tax in Brisbane, and applying an economic model of economic efficient equilibrium of the market to the situation. Furthermore, three targeted resolutions to address the economic and social issues associated with road congestion in Australia will be suggested and evaluated. Traffic congestion increases the cost of goods and services, while reducing amenity and convenience (Brisbane City Council, 2018). Traffic congestion is characterized by longer trip times, increased vehicular queueing and slower speeds. Investment in infrastructure is absolutely critical to support population growth, enable economic growth, and make sure Brisbane is a liveable city where people and business want to live, work and invest (Brisbane City Council, 2018). However, the demand has approached the full capacity for more motorways, extreme traffic congestion sets in. When vehicles are fully stopped for periods of time, this is colloquially known as a traffic jam or traffic snarl-up. Traffic congestion can lead to drivers becoming frustrated and engaging in road rage (Oguday K., 2012). The rise of congestion in Brisbane can be attributed to various causes, such as too many cars on the road for the road way. As consumers travel from point A to B, the demand for more sufficient roads are mandatory. Further blame can be placed on obstacles on the road, causing a blockage and a merge. Obstacles can vary form road work, roads narrowing down, lane closure due to utility work or an accident. Over development in populated areas has also been attributed to road congestion where the mass transit system is already overcrowded and the road system is inadequate. By adding more trains or buses while not overdeveloping, it can fix one of the many problems of traffic congestion. With an estimation cost of more than AU$16 Billion a year regarding Road congestion in large Australian Cities, Brisbane City Council (BCC) is committing $1.3 billion on 90 road improvement projects from 2016 to 2020 to tackle congestion in Brisbane. Providing an effective transport network that delivers economic, social and environmental benefits, Brisbane will maintain as a well-connected city (Brisbane City Council, 2018).

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Negative Externality of Traffic Congestion

$/user

Negative externality

Deadweight loss

PMARKET

Supply

Market Equilibrium

PEFFICIENT Efficient equilibrium D 1=Private benefit

D 2=Social benefit Q EFFICIENT

Q MARKET

Number of road users

Figure 1: Negative Externality of Traffic Congestion At the free market equilibrium, Road space is used at point Q M for a price of PM . The demand curve D 1 displays the marginal private benefit received through the use of road space. On the other hand, D 2 displays the marginal social benefit, which is less than the private benefit as the use of roads incurs traffic congestion. As the private benefit is greater than the social benefit, a negative traffic congestion externality exists. The deadweight loss as depicted on the graph occurs when the use of a good imposes costs onto a third party, implying that the cost of roads does not cover the tax costs created by over using motorways. This leads to a market that is not allocative efficient, as resources in the market are not being efficiently allocated due to traffic congestion, thus disadvantaging a third party, which in this case is society. However, if traffic congestion decreased, shown in the graph by the shift of the demand curve from D1 to D2, the market will be using roadways at a socially efficient level. At the socially beneficial level of demand, D2, roads would be used at a price of PE at the level of QE. This leads to a socially optimal equilibrium, where the social benefit of using roads is equal to the private cost and economic surplus is maximised. At this point, the market has no deadweight loss, and thus the usage of roadways at QE does not impose costs onto society. Therefore, as demonstrated in the graph, it is evident that the price paid currently for roads (PM) is higher than the socially optimal, or efficient price (PE) and the quantity of roads being used is higher than the socially optimal quantity (QE).

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Economists have long argued the best way to improve traffic flow is to charge drivers for their contribution to road congestion (Martin, L. A. and Thornton, S. 2016, p 1). In order to reduce traffic congestion, the Brisbane City Council (BCC) could consider a congestion charge, achieving the socially optimal market equilibrium. This could be accomplished by placing tolls over heavily congested roads, to increase the marginal private cost of travelling. A per-unit tax shifts the supply curve to the left, which increase the price of congestion fees, thus reducing supply to consumers, reducing the quantity demanded. In other words, congestion fees would increase prices including nonmonetary costs and discourage consumers from driving on the road as they cannot afford to drive highways the same quantity as they previously could. This increases the efficiency of a roads to a more socially optimal level. By charging road users, it can change their behaviour in ways that ease congestion. Furthermore, in the revenue earned from road fees could be utilised to invest in a future of public transport. Lastly, a policy to reduce traffic congestion is improving transport substitutes such as public transport. The largest reductions in driving from time-of-day and cordon charges come from households living 10 to 20 minutes’ walk away (Martin, L. A. and Thornton, S. 2016, p 1). Therefore, by spreading more bus stops around the inner and outer city, more consumers would change their travel methods to public transport as is will be more available. Furthermore, the Brisbane City Council has specifically prioritised 60 new buses ever year from 2016 to 2020 (Brisbane City Council, 2018). By encouraging public transport, the demand curve for road space would shift to the left, bringing the market closer to a socially efficient equilibrium. Jammed cars can burn up to 80% more fuel than those in free traffic (Springer Nature, 2018). On congested roads, reducing traffic by 5% will increase traffic speeds by up to 50% (Martin, L. A. and Thornton, S. 2016, p 1). Secondly, building more roads could be implemented. Consumers will use the new roads and traffic will spread out beyond the morning and evening peak. Building more road infrastructure should only be put into motion if it benefits consumers long-term. Majority of the time, developing more roads will not ease traffic, it will spread (Martin, L. A. and Thornton, S. 2016, p 1). When planning new road infrastructure, congestion may simply move to another part of the network without solving the congestion problem. Moreover, it could potentially make congestion even worse. It is crucial to strategically place roads where it beneficial for consumers and does not worsen congestion. Without policy change, the avoidable social costs of congestion are expected to rise to at least $31.4 billion by 2030 (Australian Government, 2018). Overall, it is evident that the current demand for road space at a socially inefficient level, leads to heavy traffic congestion to main roads. It will be crucial for Brisbane City Council to consider the possible policies and improve current policies to address the issue, through means of congestion charges, improving transport substitutes and building more roads which will decrease consumer demands for road space. This would reduce the external costs to society, and allow transportation for consumers in a more efficient and beneficial manner.

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Bibliography Brisbane City Council (2018, 17 July). Reducing congestion. Retrieved from https://www.brisbane.qld.gov.au/traffic-transport/reducing-congestion Coglan, L. (Compiler). (2016). BSB113: Essentials of Economics (4th ed.). Australia: Pearson Australia, Chapter 11.2 Cramton, P. Geddes, R.R., Ockenfel, A. (2018, 31 July). Set road charges in real time to ease traffic. Nature, 60, 23-25. Retrieved from https://www.nature.com/articles/d41586-018-05836-0 Department of Infrastructure and Regional Development. (2015, Nov.). Traffic and congestion cost trends for Australian capital cities. Retrieved from https://bitre.gov.au/publications/2015/is_074.aspx Eliasson, J. (2012. Sept.) How to solve traffic jams [Video file]. Retrieved from https://www.ted.com/talks/jonas_eliasson_how_to_solve_traffic_jams Manners, P. (n.d). Congestion pricing: why and how. Retrieved from http://www.thecie.com.au/wp- content/uploads/2014/06/Congestion-pricing.pdf Martin, L. A. and Thornton, S. (2016, 22 March). City-wide trial shows how road use charges can reduce traffic jams. The Conversation. Retrieved from https://theconversation.com/city-wide-trial-shows-how-road-use-charges-can-reducetraffic-jams-86324 Oguday, K., (2012, 8 May). Creating traffic jams of the future. Pragmatic Urbanism. Retrieved from https://tomorrowspaper.wordpress.com/2012/05/08/creating-traffic-jamsof-the-future/ Paramita P, Zheng Z, Haque MM, Washington S, Hyland P (2018) User satisfaction with train fares: A comparative analysis in five Australian cities. PLoS ONE 13(6): e0199449. Retrieved from https://doi.org/10.1371/journal.pone.0199449 Productivity Commission (2017, 24 Oct.), Transport, Shifting the Dial: 5-year productivity review, (Ch 4, Section 4.5). Retrieved from http://www.pc.gov.au/inquiries/completed/productivity-review/report/4-towns-cities Rosen, A., (2013, 8 July). What Really Causes Traffic Congestion. Bklyner. Retrieved from https://bklyner.com/what-really-causes-traffic-congestion-sheepshead-bay/

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