Economic And Social Issues Associated With Road Congestion In Australia

1. An overview of the economic and social issues associated with road congestion in Australia.
2. An analysis of the effect of road congestion on the economic efficient equilibrium of the market. This analysis should be framed around a diagrammatic exposition of the economic theory of externalities, and as a minimum, should clearly identify the theoretical market and efficient equilibrium and any deadweight loss.
3. An analysis of policies to reduce congestion (shifting the industry from the current market equilibrium
towards an economic efficient equilibrium). This is to be limited to consideration of:
(i) A congestion charge/tax/price
(ii) Improving transport substitutes (e.g. public transport)
(iii) Building more roads 

Overview of the issues associated with the road congestion

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  

Analysis of road congestion

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.

Policies to reduce congestion

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.

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.

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