'Gradual erosion': South-west roads need millions more funding

The Grattan Institute, a public policy think tank, found Australian local roads were underfunded by $1 billion per year, with the vast majority of the shortfall and damage being done in regional and remote areas.

"Our local roads, especially in the bush, are a dangerous disgrace," the institute's report said.

"We estimate an extra $1 billion is needed next year just to keep the roads in the same state they're in today."

But while the report urged a major increase in federal road funding, the government announced on November 14 it planned to reduce the share of funds it provided states and territories for road projects.

The Grattan analysis found much of the annual $1 billion deficit was thanks to country councils being short-changed in favour of big city areas that didn't need the funding or "mega projects" that looked impressive but didn't deliver bang for buck.

"Over investing in mega projects and under investing in maintenance short changes the community because the net benefits of local roads projects are typically much higher than those of mega projects," the report said.

"For instance, a small local Black Spot project is only eligible to be considered for funding if its benefits to the community outweigh its costs by two to one; by contrast, even before their costs blew out by billions of dollars, Melbourne's West Gate Tunnel and the Inland Rail freight line both were only expected to yield one dollar of benefit for every dollar spent."

The report showed under-spending on local roads grew worse the further you went from the big cities, a trend driven by unbalanced funding allocations and the much greater road networks regional and remote areas had per head of population.

It found country areas, with their smaller populations, also had a harder time raising revenue through rates, which made it even more difficult to find the money to maintain their large road networks. "Local governments are often at their limit of raising their own revenue," it said.

Moyne Shire Council revealed in July 2023 that 43 cents in every dollar of rates revenue was invested back into its roads, bridges and drainage. In the 2022-23 financial year the council collected nearly $1500 in rates per head of population, higher than almost any big-city council, but lower than most remote municipalities.

The Grattan report also showed freight traffic on local roads had increased substantially in the past decade: twice as fast as passenger traffic, and five times faster than maintenance spending. Part of the spending shortfall stems from the federal government decision to freeze indexation on financial assistance grants in 2014, which meant they didn't rise for more than three years.

The report made several recommendations, chiefly the federal government raise local road funding by the required $1 billion per year, with a $600 million increase to financial assistance grant funding and $400 million to Roads to Recovery funding.

Moyne Shire has relied heavily on both programs. The council spent about $16 million in 2022-23 on its roads, bridges, paths and drainage, and received more than $13 million in financial assistance grants, and $2.7 million in Roads to Recovery funding.

Both former mayor Karen Foster and new mayor Ian Smith have said they expect the grant funding to diminish in the next couple of years with the council having to "do more with less". Federal Infrastructure Minister Catherine King announced a new infrastructure policy on November 14, 2023 that appeared to substantiate those fears.

"We are reshaping how the Commonwealth funds projects, returning to a preference of 50:50 funding with the states and territories for future investments," Ms King said.

The federal government currently contributes about 80 per cent of infrastructure funding, compared to 20 per cent from the states. It isn't clear whether this change will mean a cut to local road funding. Ms King said the government "may may consider funding a greater share of projects in jurisdictions with less capacity to raise revenue on a case-by-case basis".