How will fixing our traffic crisis boost productivity?

Traffic congestion is a major barrier to economic growth. 

In Melbourne, our morning and afternoon peak periods are now half an hour longer than they were in 2005. Our traffic speeds have also slowed by at least 11 km per hour during these peak periods. Unless we do something, the estimated cost of traffic in Melbourne is expected to rise from $3 billion in 2005 to $6.1 billion by 2020.

The East-West toll road has been described as a ‘congestion-busting’ road, but local and international research has repeatedly shown new roads eventually increase traffic, and that any congestion relief is relatively short-lived.

On the other hand, world-class public transport reduces traffic and brings with it many economic benefits.

Public transport saves us money and boosts our economy

  • Every kilometre travelled on world-class public transport, and not stuck in a car in the most heavily congested areas of Melbourne, would contribute $1.67 to the economy.
  • International research has reached similar conclusions with a recent study finding that for every passenger mile travelled on public transport in peak hour in Los Angeles there was a benefit to the local economy of between US$1.20 and US$4.10.
  • Melbourne commuter living 15 km from the CBD can save between $6,036 and $8,672 per annum by travelling to work by public transport rather than by car.

What’s ‘agglomeration’ and does a road really help?

One of the claimed economic benefits of the East-West toll road is that it will ‘facilitate agglomeration’. Agglomeration is when businesses perceive that they can benefit from clustering together in one location, forming business hubs or centres.

Good transport access to these hubs is fundamental to creating agglomeration economies. It is widely recognised that public transport works better at supporting agglomeration economies because its main purpose is to get large numbers of workers and customers to the same business area during a brief travel window.

On the other hand, roads struggle to have the same effect, as freeways leading to city centres quickly fill with traffic. Put another way, world-class public transport supports an agglomeration economy as it puts good jobs and similar businesses together with an efficient mode of transport.

Some facts about agglomeration

  • Public transport networks can play a big role in maximising the benefits of agglomeration by allowing a greater number of people to access geographically-distant labour markets, and reducing transportation costs.
  • The Victorian Department of Transport found that traffic on our roads slows down freight and other business-to-business interaction. The agglomeration of business activity in city centres will stall unless we address crowding issues by adding more capacity to our train and tram networks.
  • Research in the UK found that a 10% increase in the level of agglomeration is associated on average with a 1.25% increase in aggregate productivity. Researchers in Australia have reached similar conclusions.
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