In a report released on Monday, the institute’s transport and cities program director, Marion Terrill, said rising congestion and huge government investment in new road and rail projects warranted a new low-cost approach. “Decades of building new roads and new public transport capacity have led us to the state of congestion that we see today," she said. "More of the same in terms of more roads and public transport are likely to lead to the same level of congestion.” The cordon charge – which already exists or is being trialled in cities like New York, London and Stockholm – is being recommended for major Australian cities including Melbourne and Sydney. It would see travel speeds improve by 1 to 2 per cent across the network, the Grattan modelling finds. This may not seem like much, but it equals the travel savings expected from the $15.8 billion North East Link, the $6.7 billion West Gate Tunnel and the dumped $5.3 billion East West Link, the modelling has found.

The Andrews government has remained steadfast in refusing to consider congestion charging in Victoria. "We have no plans and do not support a congestion tax," a government spokeswoman said. "The best way to ease congestion is to build a public transport network system which can deliver more trains, more often – and we’re getting it done." Detractors of the policy argue that a CBD charge would penalise low-income earners living in far-flung suburbs, who were forced to drive due to a lack of public transport alternatives. To combat this, Ms Terrill recommended a fairness fund offering discounts to low-income earners, especially where motorists lacked transport options. Those who drive to the city for work and would pay the fee are more than twice as likely to earn a six-figure salary, the report said. Ms Terrill questioned the government's reluctance to consider road-user charges, arguing that the state was willing to drive up the tax burden by building mega toll roads but was ignoring cheaper options to improve the existing roadway, which could even raise government revenue.

Loading “Given that our ministers are happy to charge for new roads such as the West Gate Tunnel and the North East Link which will become choked like our existing roads, it is difficult to take seriously their refusal to charge for using existing roads so they can run more smoothly," she said. Ms Terrill said the cordon charge would deter retirees and shoppers, who can be flexible with their commuting time, while tradespeople, delivery drivers and people who needed to be at work or in class at a particular time would likely be slugged. Within five years of the cordon charge being introduced, a ‘corridor’ charge that would put a price on kilometres travelled on major freeways and arterial roads during peak periods should be rolled out, she said. Down the track, the system should be expanded to charge motorists per kilometre during peak periods within designated precincts, she said. Road safety and tolling technology that capture number plates could be used to charge motorists.

Infrastructure Victoria, the RACV, Infrastructure Australia and the 2010 Henry Tax Review have backed road-user charges. But Adrian Dwyer, the chief executive of Infrastructure Partnerships Australia, instead recommended charging electric vehicles rather than all motorists, as these drivers were already avoiding paying the fuel excise by not using petrol to fuel their cars.