Experiments in privatization - Victoria's public transport system


E Michael

Document Type

Conference Paper

Publication Date


Subject Area

organisation - privatisation


This paper reviews the changes to public transport policy and performance in the state of Victoria, Australia, over the past decade. Like many other publicly-owned networks outside Europe, VictoriaÕs public transport system had decayed slowly after World War 11, to the point where its continued operation was seriously questioned; yet today, after only four years of reform, the system has turned around its economic performance and seems set to contribute to the stateÕs development in the 21st century. After 20 years of cost containment policies, directed by treasury bookkeepers and political expediency, VictoriaÕs public transport operations were in disarray by 1992. Overall the system raised only $1 in revenue for every $3 in expenditure, and the level of operational subsidies accounted for approximately 9% of total state expenditure. Performance indicators mirrored the high level of public dissatisfaction. Four years later, VictoriaÕs public transport system, managed under the umbrella of the Public Transport Corporation (PTC), has improved its net cost-recovery to around 50% and reduced operational subsidies to less than 4% of state expenditure, while overall performance has improved significantly. Moreover, the PTC has reorganised and consolidated its transport functions into viable business units, each with a commercial future for the 21st century. Miracle, myth or reality? Transport analysts are accustomed to dynamic change but usually where it concerns breakthroughs in technology, the provision of capital, or real changes in labour productivity. In Victoria, in only 4 years, the stateÕs public transport system has gone from basket-case to commercial reality. Raw facts alone do not accord with standard expectations, but rather suggest the cause is the most profound change in management policy since, 1859, when government first took up the operation of railways from the private sector. In an effort to explain the extent of change, this paper seeks to review the development ofÕ policy, legislation and management, and to identify the impact on operations and financial performance. To meet these objectives, this paper is divided into four sections: the first provides an essential description of the PTC and its functions, while the second identifies the scope of change to policy and regulation. The third section deals with the economic turnaround, with a final section that makes some observations about organisational culture and the potential to sustain this process.


Permission to publish abstract given by AET.