ASX 200 shares closed lower on Tuesday with the S&P/ASX 200 Index (ASX: XJO) losing 0.38% to finish at 6,826 points.
With the chatter of inflation making its way around investor circles, even the most seasoned investors are searching for ways to protect capital, and save a buck or two.
Australian inflation at its highest level in decades
Inflation is a rate of change calculator; the first derivative of price. It measures how fast prices are increasing, as opposed to just what the price increase is.
This has important implications in the debate. If prices are increasing at a rapid pace – which they are today – it is difficult to slow them down without putting a dampener on the wider economy.
Hence why people tend to wind back discretionary spending to trim back the effects on personal savings and wealth.
There are, however, certain costs that are unavoidable and must be factored into our everyday budgets.
In Australia, one of the more peculiar costs our city dwellers face is that of toll roads. While not a unique Australian phenomenon, the prices we pay just to use various motorways in our capital cities are.
Enter Transurban Group (ASX: TCL), the manager and operator of the major toll roads in Australian capital cities. It also has a footprint in the United States and Europe.
The company, which books its revenues from the collection of toll fees charged to road users, clipped an 18% year-over-year gain in revenue for FY22. It brought this down to a 107% year-over-year gain in net profit to $19 million.
These results occurred while average daily traffic (ADT) recorded for the 12 months declined by 0.5%, proving that average prices increased.
And as mentioned, in Australia, we pay exorbitant fees to use toll roads.
Here in Australia, the most expensive road in the country is Melbourne's CityLink network, where drivers pay up to A$10.05 to drive the full 22km.
However, following CityLink, the next seven most expensive tolls in Australia are all found in New South Wales, with the most expensive of these being the toll on the M4 section of WestConnex, where the maximum charge is A$8.52.
You may start to question how all of this really stacks up.
We are, after all, Transurban's customers by design, not by choice, when having to use the roads.
Moreover, tolls are typically indexed to inflation, meaning that, instead of Transurban absorbing any cost increases in its $19 million profit margin, costs are passed directly on to consumers.
What Transurban's critics have to say
It should come as no surprise that the company and its business model have received a fair bit of criticism of late.
Most recently, the director of logistics giant Linfox Group, Bill Kelty, was vocal about the substantial returns Transurban receives as part of its ownership of numerous Australian tollways.
Kelty was critical of the entire situation in a recent interview.
"You have Transurban rooting everybody, you've got governments not able to make decisions," Kelty said, cited by the Australian Financial Review (AFR).
"Don't get me wrong, Transurban are not the rogues here – Transurban is exploiting government stupidity," he added.
Kelty said former Victorian premier Jeff Kennett guaranteed a 14% return for Transurban in its earlier days.
"You could have got it [infrastructure] funded at 4% – it's cost every school and every hospital equivalent in Victoria," he concluded.
However, one point to think about, is that Transurban is majority-owned by superannuation funds. This means the whole toll road situation may be generating additional wealth for Australian savers.
Transurban shares finished 0.72% down on Tuesday at $13.71.
