Monday, May 30, 2011

Faring Pretty Well

Public transport fares are a difficult issue for any government.

It goes without saying that it would be great if there were no fares and public transport was subsidised 100% - no doubt there are many people who take that view.

The problem is of course government's limited resources - when there are only so many dollars to go around, it makes sense that the people using public transport chip in.

How much should that contribution be?  As of right now, NSW train passengers (just to take an example) pay approximately 25% of the cost.  In other words, 75% of the cost of running CityRail is covered by government funding.

Taken from Prices and Services Report
For some people, fares are far too high, so they don't use public transport.  For others (like me) the fares are low enough that we would happily pay a fair bit more before we were tempted to jump into a car.

Early 2010, we were introduced to the MyMulti ticket. The most generous MyMulti ticket allows you to travel anywhere you could get to without a countrylink (the area bounded by Newcastle, Dungog, Scone, Lithgow, Richmond, Goulburn, Bomaderry and Bondi Junction) as well as unlimited bus and ferry.

As of June 2010, a MyMulti3 cost $2280 for a yearly pass.

The strange thing is this - a yearly ticket from Gosford to Wynyard is still available to be purchased for $2464.

Before the election, O'Farrell promised to reduce fare prices for CityRail services.  The table provided (and still available on the Liberal website) promised savings of $100 on all yearly tickets, regardless of the original price.

There would be the same reduction for persons buying MyMulti tickets.

Today Gladys Berejiklian announced tickets would be falling by 9% (see this table)

The cut applies to all monthly, quarterly and yearly tickets, but not to individual tickets or, crucially, weekly or fortnightly tickets.

These cuts are well in excess of the cuts promised during the election.

I don't have any stats on this, but anecdotally it seems to me that, as a percentage of total trips, not many trips are made on individual tickets.

But, judging from the queues every monday morning, a lot of people travel on weekly and fortnightly tickets.

Last year Labor introduced fortnightly tickets in an attempt to reduce the number of people queuing on monday mornings, which made a lot of sense. That said, the tickets somewhat inexplicably did not give any discount compared to buying a weekly (in the way that discounts are given for monthly, quarterly and yearly tickets).

What the changes announced today effectively do is increase the discount for a monthly, quarterly or yearly purchase.

So, what discount is allowed at the moment?  I'm going to assume that most people buying these tickets are commuters, and are therefore travelling between the same two stations five days a week.

Using the example of Gosford to Wynyard, we can see the following:

Return: $15.60
Weekly (7 days, so 5 workdays): $56, or a 28.2% discount
Monthly (28 days, so 20 workdays): $224, or a 28.2% discount
Quarterly (90 days, so approx 65 work days): $616, or a 39.3% discount
Yearly (365 days, so approx 260 work days): $2 464, or a 39.3% discount

As you can see in the table released today, the additional discounts apply to the monthly, quarterly and yearly tickets only.

The new price structure works out as follows:

Return: $15.60
Weekly (7 days, so 5 workdays): $56, or a 28.2% discount
Monthly (28 days, so 20 workdays): $204, or a 34.6% discount
Quarterly (90 days, so approx 65 work days): $560, or a 44.8% discount
Yearly (365 days, so approx 260 work days): $2 240, or a 44.8% discount

The My Multi tickets will fall in price as well, but only by the amounts promised during the campaign - $9 for a monthly, $25 for a quarterly and $100 for a yearly.

A yearly MyMutli3 will therefore cost $2 180 (still cheaper than a Gosford to Wynyard yearly).

I guess my thoughts are this: first of all, kudos on the Liberals for overdelivering.  It's not often we see that a party over-deliver after a win, and it is not often that we see fares reduced outside of an election year, so they deserve credit for that.

That said, one would have thought that the massive budget black-hole would prevent any such generosity, but perhaps I'm too cynical.

Secondly, why are people still able to buy yearly tickets between two stations in situations where it would be cheaper to buy MyMulti3 tickets? I don't know whether CityRail have a policy of suggesting the MyMulti tickets were it is in fact cheaper, but I would have though that to do so would only be fair.

What I'm really interested in though is whether these changes well directed.  We certainly should be encouraging more people to buy monthly, quartly and yearly tickets, because the cost to CityRail is less (staffing at windows, servicing of machines etc) - but if a 39% discount wasn't enough to convince you to commit, is 45% going to be?

Is this discount just throwing money away for a good headline - or will it actually have an appreciable effect on consumer behaviour? Or is it just meant to be a recognition of sorts that monthly, quarterly and yearly ticket prices are generally too high?

A lot of people still buy weekly tickets for all sorts of reasons - perhaps they might be planning on changing jobs, or locations, or perhaps they are not sure when they might take a week or two of leave.

Perhaps others don't have sufficient funds available to "pre-pay" for the travel to such a degree, even though in the long run it works out cheaper.

I'm certainly not complaining - I'm a yearly ticket buyer, so that is $100 extra in my pocket next year.  I just hope that this move is being done for more than a positive headline.

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