I am ambivalent about Mr Baillieu’s proposal to offer free public transport to young people and full time tertiary students in Victoria.
Fares on buses and trains in Victoria are well above marginal cost (and a long way above social marginal cost given un-priced congestion externalities) but I do not believe these marginal costs are zero so this measure will induce inefficient travel – this is the reason I have opposed zero priced public transport in the past.
But these transport costs are a heavy burden for young people on low incomes who benefit, in any event, from concession fares already. At an estimated cost of $70 million annually it is not an ideal policy but not the worst either. It would be costly to means test it so the sons and daughters of wealthy parents will benefit from the policy. But, as handouts go, I am less annoyed by this proposal than I normally would be. The Bracks Labor Government seems on a par with most of the debt phobic state governments in Australia, recently achieving a state budget surplus of $825 million.
The ‘free fares’ policy does nothing to improve service frequency or to rid the bus system of foolish regulations regarding route choice. Nor will it provide improved incentives for the private sector to enter these markets and provide better alternatives to travel than the use of a private car. Anonymous Lefty likes the policy but not the fact that it is made by the Liberal Party.