"CPI or 4%, whichever is greater"
Start with the phrase that appears, in one form or another, right across privatised infrastructure. It is the tell. A price that merely tracked costs would use CPI alone.
Read that clause slowly, because the design is the point. If the goal were simply to keep a price in line with costs, you'd index to CPI and be done. Choosing "CPI or 4%, whichever is higher" only makes sense if the aim is to guarantee a real increase — a rise above general inflation — in every year where inflation runs below 4%, and to keep pace in every year it runs above. That is a one-way ratchet: it can go up, it cannot go down, and by construction it outpaces the very inflation measure it invokes. verified "one-way ratchet" framing = analysis
Why the "or" matters Ordinary competitive prices go up and down — a supermarket discounts, an airline runs a sale, a phone plan gets cheaper as rivals fight for you. A "greater-of" escalator removes the downside entirely. It's not a forecast of costs; it's a floor on your bill, locked in by contract until 2040, 2048, 2060. analysis
Anchored on the tolls page: escalation mechanism and 90% figure from Transurban investor materials; exact per-asset floors are company-sourced. See Sources.
The same clause, everywhere you can't say no
The ratchet isn't a toll-road quirk. The same CPI-plus logic — sometimes CPI alone, sometimes CPI as a floor on a regulated return — runs through the essentials you can't opt out of.
| Sector | The escalator | Runs until |
|---|---|---|
| Toll roads | Greater of CPI or ~4%/yr (WestConnex: CPI-or-4% to 2040); 90%+ of revenue auto-escalates | 2045–2060 |
| Power networks | Regulated return on a CPI-indexed Regulated Asset Base (RAB); network charges ~40–45% of a NSW bill | ongoing |
| PPP availability payments | Government payments to hospital/school/transport operators typically CPI-indexed | 25–30 yrs |
| Ports & land registry | Charges/fees on these monopolies rise over time under long concessions | long concessions |
Notice what these have in common. Every one is a monopoly — one road network, one power grid, one port handling your imports, one land registry. Every one is unavoidable: you can't shop around for a rival motorway. And every one carries a contractual escalator tied to CPI, running for decades. That combination — monopoly, essential, indexed, long — is what turns indexation from housekeeping into a structural cost-of-living pressure. verified "structural pressure" = analysis
Per-sector facts: tolls · power networks & the RAB · PPP availability payments · ports & land registry. Full citations on Sources.
The machine, in one loop
Here's the argument in a single diagram — why a set of separate clauses behaves like one economy-wide engine. Read it as analysis: no single link "causes" inflation, but together they compound.
The self-reinforcing bit is the tail of the loop. Toll and network charges are inputs to almost everything else: freight moves on tolled roads, through privatised ports, powered by grid electricity. Every business that pays those charges passes them on. Those pass-throughs help lift CPI — and next year's toll and network increases are indexed to that higher CPI. The ratchet feeds the index that feeds the ratchet. We'd call it administered inflation: a price pressure that's baked into contracts, separate from supply and demand, and immune to the usual cure of competition. verified "administered inflation" / compounding loop = analysis magnitude of the feedback is not quantified here
You can't shop your way out A competitive price that got too high would invite a rival to undercut it. These can't be competed down — they're legal monopolies with escalators running to 2045–2060. Households can't switch to a second Sydney motorway or a second power grid. The discipline that's meant to make privatisation work is precisely the thing the contracts remove. analysis
The honest counterpoint
This is the page most open to overreach, so we'll make the strongest case against our own argument — and then answer it. If the rejoinder doesn't hold, the argument shouldn't stand.
The economist's objection
"Indexation isn't the same as causing inflation. Linking a price to CPI just holds it constant in real terms — and any one regulated sector is a small slice of the CPI basket. You can't blame the cost-of-living crisis on toll deeds; that's supply shocks, energy markets, monetary policy. This is confusing a symptom for a cause."
The rejoinder
Largely true — and we concede it. No single clause "causes" inflation, and CPI-only indexation really is just real-terms holding. But two things break the reassurance: the clauses aren't CPI-only, they're "greater of CPI or 4%", so they bias above CPI; and they sit on unavoidable inputs — transport, energy, freight — that flow into everything. A web of above-CPI escalators on essentials, compounding for decades, that no market can discipline, is a structural upward bias on the cost of living. Small per-clause; not small in aggregate or over time.
So be precise about the claim. We are not saying toll deeds drive the headline inflation print, or that indexation is illegitimate in principle. We are saying that a deliberately chosen "greater-of" ratchet, replicated across monopoly essentials and locked in until mid-century, adds a permanent, one-directional tilt to the cost of living — and that this tilt was a design decision, made in contracts the public never voted on and can't renegotiate. That is a smaller, sharper claim than "privatisation caused inflation" — and it survives the objection. analysis
Inflation nobody voted for
Strip away the machinery and here is what's left. A slice of the cost-of-living increase Australians feel every month is not weather, war or the RBA. It's arithmetic — written down, signed, and running to 2060.
Administered inflation, by consent you never gave When the RBA lifts rates to fight inflation, at least it's an accountable public body you can vote to influence. The contractual ratchet answers to no one. It rises whether the economy is booming or in recession, whether you drove more or less, whether wages kept up or didn't. It was set decades ago, in documents most of which you're not allowed to read, and it will still be rising when today's toddlers are paying it. That's not a market clearing — it's a private tax on movement, power and freight, indexed to guarantee it grows in real terms forever. analysis
And here is the sting the rest of this site has been building to: much of the machine is owned by Australians' own compulsory superannuation — IFM Investors, AustralianSuper and the like hold the toll roads, the ports, the power networks. So the above-inflation rent partly flows back to the funds. That doesn't make it harmless. It's still extracted from every household as a higher price at the bowser, the toll gantry and the power bill — and skimmed of a management fee on the way. You pay the rising price as a customer, and receive a shaved slice of it back, eventually, as a saver. The loop gets its own page → verified "still extracted" framing = analysis
Cross-references: The toll roads · Power bills · How the deal works · Your own money. All figures and their caveats live on Sources.