Free Public Transport as a Cost of Living measure

As fuel costs continue to fluctuate as a result of the Strait of Hormuz being blocked, limiting oil supply to Australia and fuelling localised consumer panic buying, some Australian state governments are turning to providing temporary Fare Free Public Transportation (FFPT) as a Cost of Living measure. Victoria recently announced that public transport would be free across the state from the 31st of March to the 30th of April, including regional and metropolitan trains, trams, and buses (and excluding airport buses, ferries and privately run services), at an estimated cost of $70m. Similarly, Tasmania announced that buses and ferries in the state will be free from the 30th of March to the 1st of July, at a cost of $850k monthly, or around $2.5m to July.

Other states including New South Wales and South Australia have indicated their opposition to the policy, citing the high costs of doing so ($140m-$160m a month for NSW) and the existence of already-high subsidies for their fares. Queensland represents a different policy angle, having already effectively had a policy for cheaper fares, with their 50c fares being in place for the past two years as a policy started as a pre-election trial under the Labour government, and continued permanently under their current LNP government. This policy increased ridership in Brisbane by 22% between February 2025 and 2026, with 200 million trips taken in the period in which the policy has been made permanent.

Overall, the announcements serve as good politics, but poor policy. There are reasonable questions around the effectiveness and practicality of policies such as these, and how the benefit is shared across parties. Past NineSquared research on Nearly Free Fares has found that studies have shown varied results in the past:

Benefits from past trials include increased public transport usage and potential long-term effects on travel behaviours once the scheme has ceased. Some agencies found almost free fares resulted in normal or even increased car traffic. This could potentially be due to commuters driving to reach public transport hubs, resulting in increased local traffic. Alternatively, individuals may find car travel more convenient and efficient for particular routes, continuing their driving habits despite reduced prices.

Aims of the policy

The primary objective that these FFPT policies are being touted as tackling are short-term cost of living relief, making public transport more accessible by removing the cost barrier for users, alleviating the expenses associated with owning a car and providing new travel practices for individuals. This also serves the purpose of politically achieving something, which is a key driver for those in charge.

A secondary objective (that is perhaps being overstated in its feasibility) is the reduction of fuel demand, which is theorised to occur through increasing public transport demand, which in turn may reduce fuel demand as people who would have previously driven now may use public transport to commute or travel. The currently scarce fuel may then be redistributed to rural/regional areas that need it more.

BITRE data on the national use of public transport shows that bus and rail transport only made up 8% of all national motorised passenger transport in 2024-25, representing a small portion of the national passenger transport task, and significantly less than passenger cars as visualised in the figure below. Even if public transport patronage increased substantially, the maximum plausible reduction in fuel demand would be modest given the dominance of passenger cars.

transport by mode:

Long term, the policy may lead to modal shift which could reduce traffic congestion and mitigate the negative externalities of car usage, including pollution, noise and road crashes, however this is not being referenced in the objective of these temporary FFPT policies.

There are plenty of examples where fares are free in cities, for specific routes (i.e. the Melbourne Free Tram Zone), customer groups (i.e. Companion Card or Vision Impairment Pass holders in QLD or NSW, or Pensioner Concession Card holders in VIC), or all users. Notable examples of the latter include Tallinn in Estonia, the entire country of Luxembourg, and an increasing number of cities across France (the biggest of these being Dunkerque and Montpellier).

Benefits of the policy are not shared equally

Public transport is only feasible as a method of transportation to those that live near it and can access it, which is largely those that live in metropolitan areas of states. Data from TfNSW suggests that those living in the Sydney GCCSA in 2024/25 completed 9.8% of their total trips on public transport, whereas those in the Hunter and Illawarra regions only took 3.4% and 4.5% of their trips on public transport respectively. Similarly, the Victorian Integrated Survey of Travel & Activity (VISTA) shows that only 7.2% of trips were made using public transport in Greater Melbourne in 2024-25.

Public transport is particularly effective at providing services to the large number of people who could already work from home, therefore as a cost of living measure, it is targeting households who already spend a relatively low proportion of their income on public transport, as displayed in the figure below. If the aim of the policy is to reduce fuel demand, then there needs to be a very large mode shift from passenger cars to buses or rail to make a meaningful difference to car use and therefore petrol demand.

expenditure:

Note that this graph shows values from 2015-16, as no newer datasets have been released by the ABS describing household public transport expenditure.

A free fare policy would only directly affect a small number of users, but is being paid for by all taxpayers in the state, leading to questions of equity. While there may be some induced demand from the policy and the compounding effects of increasing fuel costs, it is unlikely that this would meaningfully increase the number of public transport users in a given state.

Costs of the policy could be better utilised elsewhere

Removing fares eliminates a source of revenue that would otherwise fund services or service improvements. Maintaining the same level of service therefore requires additional government funding, which ultimately imposes higher economic costs on society through increased taxation.

The ‘cost’ of removing fares will differ across different transit agencies depending on their existing level of government subsidy and the proportion of total revenue that is comprised of revenue from fares. Most FFPT systems had relatively low levels of cost recovery prior to the implementation of FFPT, making the decision to forgo revenue easier to make. Luxembourg’s public transport system, for example, cost the country over €500m to run annually. Fares covered around €40m of that cost. Other FFPT systems have even lower levels of fare collection. Tallinn, the poster child for FFPT, for example, reported fare revenue of €12m (albeit for a smaller system than operates in Luxembourg).

Estimates of the cost of a month of FFPT in Australia vary across states due to ridership and fare levels, ranging from $800k a month in TAS, to an estimated $33m in QLD (noting this is calculated based on 50c fares), $70m in VIC and $150m in NSW per month respectively. This does not include the pre-existing cost of the currently subsidised fares, which are estimated to subsidise around 75% of existing costs of operating public transport, depending on the state. This revenue collected from fares that is now forgone has to be taken from somewhere, which likely means cuts to other budget areas, such as health or education, which is pertinent given upcoming state and federal budget reviews. There may also be higher costs of operating public transport associated with FFPT if ridership increases significantly, requiring additional services or maintenance.

As an example, for the cost of one month of FFPT in Victoria, more regional train services could be delivered, or further investment in mental health and emergency care could be undertaken, delivering wider benefits.

Could negatively impact current public transport users

The induced demand from the increased accessibility of FFPT, or for some the novelty of such a policy, may lead to adverse effects on those already commuting with public transport if services are not increased alongside the policy, as this may lead to overcrowding or services being too full for all potential customers to utilise. This may have a negative effect on new users as well, who may be turned off from using services that are too busy or full.

As recently reported in NineSquared’s monthly Fares Newsletter, fares were free in Victoria on weekends between the start of December 2025 and February 2026 to celebrate the opening of their new Metro Tunnel. Patronage was increased by 23% during this period compared to the same point in the previous year. If this increase was sustained across weekdays now that fares are free, this may lead to some services in the peak becoming overcrowded if not matched by service increases.

Conversely, evidence from Tasmania, where fares have been 50% off between June 2024 and June 2026 (and are now free for the remainder of that period), found that the policy failed to increase passenger numbers. Boardings in February 2025 were 1.3% less than in February 2024, showing that the fare decrease did not have a significant impact on the number of passengers. However, bus usage in Tasmania reportedly increased by 20% in the week before FFPT was introduced, implying there may be some effects of the fuel shortage on patronage.

Why FFPT falls short

Overall, FFPT is unlikely to have a large impact on total fuel demand relative to the cost of the policy. While the short-term hit of free public transport might serve some temporary affordability purposes for those that can utilise it, long term mode-shift and environmental goals would be better served through investment in better services. Service expansion to new areas, higher frequency services and a longer span of operating hours are likely to lead to a greater modal shift from cars and a lower overall cost of travel (for all travellers) than reducing or removing fares.