Taxi industry inquiry
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- Cost growth (excluding payments to licence owners)
- Fare growth under industry proposals
- Own-price elasticity of demand
- 5 year Base year Industry proposal (1)
- Fares ($ per passenger kilometre)
- Passenger demand (million passenger kilometres)
- Payments to licence holders ($)
- Driver payments per hour ($)
- Licence value
- 10 year Base year Industry proposal (1)
- 20 year Base year Industry proposal (1)
- Impact of hire car changes
Table 13 Growth assumptions used in the inquiry’s longer term modelling
The inquiry compares its modelling of the approach recommended in this report with its modelling of the licence trigger approaches supported by the VTA in the tables below, estimated over five, 10 and 20 years. Table 14 Comparing the inquiry’s proposals with industry proposals (five, 10 and 20 years)
The inquiry concludes that: In the shorter term:
In the longer term (10 to 20 years), the differences between the approaches become more stark:
The inquiry considers that this modelling demonstrates the benefits to consumers of moving to a less restrictive licensing system. The short term benefits arise in the form of better driver quality, while in the longer term benefits derive from lower fare growth, greater availability and growing the market more generally. This modelling also does not take account of benefits from greater scope to innovate and do more non-traditional taxi work, which becomes more feasible with lower licence prices (including share rides and fixed route work). Nor does it account for additional cost savings that are achievable through the proposed measures, including advertising and the removal of mandatory affiliation. Impact of hire car changes The inquiry has also considered how changes to the regulation of hire cars and the introduction of PBOs will affect demand for taxis. This can be incorporated into the modelling by bringing hire car demand into the demand function for taxi services. While it could be expected that the two are negatively related so that more hire cars would lead to reduced taxi demand it is highly uncertain just how close this link is. Formally, in the model this is reflected in a cross-elasticity: the percentage impact of a one per cent increase in hire cars on the demand for taxi services. The inquiry considers this value must be inferred based on a reasonable judgement of the likely substitutability of these services and the respective shares in demand of the two services currently (that is, it is unreasonable to assume a very large cross effect, purely because taxis currently have a far greater share of demand for pre-booked services). The inquiry’s modelling has therefore focused on the impact of cost reductions from lower licence prices and the removal of luxury vehicle requirements, and the increased entry this may facilitate. This modelling indicates that the proposed changes will have a relatively minor impact in the short term. This is because the cost savings expected are not quantitatively large – the inquiry estimates cost savings of around $3,000 per year broadly split between similar-sized reductions in licence and vehicle costs. This is expected to lead to entry of around 100 to 200 more hire cars. At this rate of entry, the inquiry expects that the impact on demand for taxi services will be relatively minor. For example, using an elasticity of taxi demand with respect to numbers of hire cars of -0.05 (a 10 per cent increase in hire cars leads to a –0.5 per cent fall in taxi demand) with 200 new hire cars would lead to just over a one per cent decrease in taxi demand. This is the equivalent of 13,000 passenger kilometres per new hire car that switch from taxi users. This kind of effect would only have a minimal impact on the operation of taxi services in the short term. Finally, the inquiry does not factor in any changes in prices by PBOs as part of this modelling and nor would it be appropriate to do so. The reason is that the proposed changes primarily affect fixed costs and changes in fixed costs do not affect firms’ pricing decisions. A well-known result in economics is that firms profit-maximise by equating marginal revenue with marginal cost, not fixed costs. The size of fixed costs ultimately determines how many firms will be feasible in the industry and this is the kind of effect modelled by the inquiry.
4WD Four Wheel Drive ABS Australian Bureau of Statistics ACCC Australian Competition and Consumer Commission ACL Australian Consumer Law APCA Australian Payments Clearing Association ATDA Australian Taxi Drivers Association ATO Authorised Taxi Organisation BCC Black Cabs Combined CAV Consumer Affairs Victoria CBD Central Business District CBS Central Booking Service CCTV Closed-circuit television CEO Chief Executive Officer CH Country hire car COAG Council of Australian Governments CSM Customer Satisfaction Monitor DARU Disability Advocacy Resource Unit DSAPT Australian Disability Standards for Accessible Public Transport EFTPOS Electronic Funds Transfer at Point Of Sale ESC Essential Services Commission FCLC Federation of Community Legal Centres Victoria GMTLR Greater Melbourne Taxi Licence Release GPS Global Positioning System GST Goods and Services Tax IPART Independent Pricing and Regulatory Tribunal IRR International Rate of Return MH Metropolitan hire car MPTP Multi Purpose Taxi Program NBG National Billing Group (CabFare) NCP National Competition Policy NDIS National Disability Insurance Scheme NMI National Measurement Institute NSP Network Service Provider NSW New South Wales NYC TLC New York City Taxi and Limousine Commission OH&S Occupational Health and Safety OIML International Organization of Legal Metrology PBBS Performance Based Booking Service PBO Pre-Booked Only cab PCI Payment Card Industry PwC PricewaterhouseCoopers RACV Royal Auto Club of Victoria RBA Reserve Bank of Australia RH Registered Hire RTO Registered Training Organisation SV Special Purpose Vehicle TIA Transport Integration Act 2010 TII Taxi Industry Inquiry TISV Taxi Industry Stakeholders Victoria Incorporated TSC Taxi Services Commission VCAT Victorian Civil and Administrative Council VCOSS Victorian Council of Social Service VDAC Victorian Disability Advisory Council VECCI Victorian Employers’ Chamber of Commerce and Industry VEIC Victorian Events Industry Council VEOHRC Victorian Equal Opportunity and Human Rights Commission VSBC Office of the Victorian Small Business Commissioner VTA Victorian Taxi Association VTD Victorian Taxi Directorate VTIC Victorian Tourism Industry Council WAT Wheelchair Accessible Taxi WCAV Wedding Car Association of Victoria 1 Office of the Premier of Victoria, Media Release (28 March 2011), ‘Taxi services reform to commence with industry inquiry’ 2 Copies of these Acts are available at the Victorian Legislation and Parliamentary Documents website: www.legislation.vic.gov.au 3 Office of the Premier of Victoria, Op. Cit. 4 Parliament of Victoria, Legislative Assembly, 2 June 2011 6 See chapter 22 of the Draft Report for a more detailed discussion about the principles of best practice regulation 7 Commissioned research papers are available at the inquiry website. 8 Chapter 2 of the Draft Report sets out the inquiry’s approach to collecting information and data, and the difficulties it encountered in obtaining comprehensive and accurate data 9 Appendix A of the Draft Report contains details of the inquiry’s community engagement strategy 10 TISV is a new organisation established during the life of the inquiry 'to act in the interests of the Victorian taxi industry’. 11 Latitude Insights (2012), Taxi Services Commission: Consumer Detriment Research – Prepared for the Taxi Industry Inquiry, Melbourne 12 Ipsos Social Research Institute (2012), Taxi and Hire Car Research 2011 – Prepared for the Taxi Industry Inquiry, Melbourne 13 Full details of the results of this work are set out in The Hensher Group Pty Ltd (2012), Demand for Taxi and Hire Car Services in Melbourne – Prepared for the Taxi Industry Inquiry, Melbourne. This report is available at the inquiry’s website. The Ipsos Social Research Institute (2012) work also found that more than 30 per cent of non-taxi users nominate cost as the main reason they do not use taxis. 14 Hon. R Maclellan, Minister of Transport, 2nd Reading Speech, Transport Regulation (Assignment of Licences) Bill, Legislative Assembly, Hansard, 13 November 1980, p. 2,800 15 A discussion and timeline of the history of taxi licensing is set out in chapter 6 of the Draft Report. 16 Ipsos Social Research Institute (2012), Op.Cit. 17 Around 81 per cent of assignable taxi licences in metropolitan Melbourne are now assigned, compared to 26 per cent of assignable regional (Country and Urban zone) taxi licences (from licence data provided by the VTD). 18 VECCI, VTIC and VEIC submission L180, p. 1 19 VTA submission L179, p. 4 20 TISV submission E347, p. 2 21 Taxi Link Pty Ltd submission L178, p.1 22 ATDA submission E30, p. 2 23 VTA submission L179, p. 10 24 TISV submission E347, p. 10 25 TISV submission E347, p. 5 26 Rosa Mrmacovski submission 802, p.2 27 George Kitsakis submission 641, p.2 28 Anonymous submission 488, p.2 29 Anonymous submission 1020, p.2 30 Taxi Link submission L178, p.1 31 Yusef Ozyilmaz submission L052, p.1 32 TISV submission E347, p.11 33 Anonymous submission 1519, p.2 34 Peninsula Taxis submission L158, p.12 35 Taxi Link submission L178, p. 2 36 Hans Zonneveldt submission L081, p.2 37 Anonymous submission 369, p.1 38 Latrobe Valley Taxi Company Pty Ltd submission L021, p. 2. The company also pointed to the substantial depot fees currently paid by licence holders of $12,000 per annum. 39 Melbourne Zebra Taxi Alliance Inc. submission E348, p. 2 40 ATDA submission E30, p. 6 41 VCOSS submission E494, p.3 42 Federation of CLCs Victoria submission E271, p. 2 43 This assumes that operators can make $20,000 per year from operating the taxi. If that was not the case, then the licence value will fall to a level consistent with that lower stream of income. No new licences would be acquired at the $20,000 annual price Directory: data -> assets -> word doc -> 0004 word doc -> Rail safety news issue 6 – October 2011 word doc -> Review of Multiple Chemical Sensitivity: Identifying 0004 -> Rail Safety Investigation Report No 2007 / 10 0004 -> Geography Year 9 Changing Australian Communities Ways in which communities in Australia are responding to change. 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