A Coalition-commissioned inquiry has plumped for a big-brother style "eye in the sky" applying tax to kilometres travelled rather than on fuel.

Asked by Treasurer Joe Hockey to investigate impediments to infrastructure funding, the Productivity Commission has 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.