Tony Abbott rejects pay per kilometre driving tax

Tony Abbott has immediately rejected a controversial suggestion by the Productivity Commission, which would involve charging motorists for kilometres travelled rather than on fuel.

''I understand that there is some suggestion in a report that might be released today about putting GPS equipment into every car,'' the Prime Minister said at a media conference in Adelaide on Thursday.

''That certainly is a novel suggestion by Australian standards and it's not something that this government is considering.''

The Productivity Commission's draft report recommends the states and Commonwealth trial an alternative to fuel excise known as ''telematics'' – the direct charging of all vehicles for road use, worked out from information collected by GPS and wireless-enabled devices reported to a central computer which bills the drivers.

Mr Abbott also said in an interview on radio 5AA there was "a lot of good stuff" in the Productivity Commission's report but "that particular recommendation ... [was] unlikely to be accepted by any government".

''I do support an element of user pays when it comes to road infrastructure,'' he added, but said he would prefer it was restricted to motorists paying for roads through tolls and taxes rather than the government introducing a new way of billing motorists.

Asked by Treasurer Joe Hockey to investigate impediments to infrastructure funding, the Productivity Commission zeroed in on fuel excise, originally designed to fund roads but shrinking each year in real terms because of a decision by the Howard government to freeze rather than index the rate shortly after it introduced the goods and services tax.

The commission says at the moment the fuel excise and registration charges, drivers licence fees, stamp duty and tolls amount to $18 billion per year. GST on cars and fringe benefits tax would add about $1 billion more. Spending on roads amounts to $19.5 billion, and is growing faster than funding.

The draft report says it would be important to ensure the kilometre-charging measure could not be portrayed as a tax grab.

''It may be necessary for any reform to be revenue neutral when adopted and for a specified period thereafter,'' it says.

''If – and here there is scope for debate – motorists already pay their way, the greater efficiency arising from road pricing reform could be promoted as giving motorists more and better roads for a similar amount of money. It would also be fairer to only charge people for the roads they use.''

The draft report recommends Canberra ''actively encourage state and territory governments to undertake pilot studies on how vehicle telematics could be used for distance and location charging of cars and other light vehicles''.

The government should offer to partly fund these pilot studies and ensure that motorists are consulted.

The draft report warns that public-private partnership funding models often used for big infrastructure projects ''are not a magic pudding''. It says sometimes direct government borrowing and funding through debt can be more cost-effective.

''Australian governments have the capacity to fund higher levels of public infrastructure provision than provided for under current fiscal and debt management practices,'' it says.

''Use of this capacity is justifiable for projects of demonstrable high net social benefit.''

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