Motorists would pay for every kilometre they drove and the time at which they hit the road, under a plan put to the Abbott Government.
In a move that would allow petrol prices to drop sharply, the Productivity Commission wants a series of Federal Gov-ernment-funded pilot studies into what would be the biggest change to the way people are taxed to drive.
In a draft report into infrastructure, the commission said while more infrastructure was necessary there was scope to better use existing assets.
It found that with roads there was a big disconnect between how they were funded and how they were used.
Instead of paying fuel excise, the motorist, monitored by a GPS-type system, would be charged for every kilometre.
It would also enable higher charges to be imposed at peak times, encouraging people to change their driving habits.
According to the commission, the system - especially if it was revenue neutral - had the chance to improve the overall usage of the nation's roads.
"More widespread direct charging of light vehicles has the potential to provide a better road system for motorists," it found.
In the US State of Oregon, motorists in a voluntary scheme pay 1.5Â¢ in road charges for every mile they drive.
The same motorists do not pay a 30Â¢ a gallon fuel tax.
According to the commission, the average morning delay caused by congested roads in Perth is now 50 seconds for every kilometre.
In the late 1990s the delay was about 30 seconds a kilometre.
The report also makes clear it has failed to find compelling evidence that productivity levels on Australian infrastructure worksites is any different to places overseas.
While it backs tougher penalties for unlawful actions by unions, it argues the notion of a productivity crisis or a wage breakout was "misplaced".
It also backs States and the Federal Government taking on more debt to pay for infrastructure.