My response to that sort of argument is yes indeed you are 100% correct in theory and 100% wrong in practice. It's the result of framing everything as a moral argument and shooting for perfection. That never ends well.
You're better off depending on age and grim reaper to get old people to stop driving and focus on habituating young people to just not.
Yet only 8% of the distance travelled by land in the EU is by rail. Even in the most train-happy countries, Austria and the Netherlands, the figures are 13% and 11%. In those countries, more than 75% of land travel is done by car.
So even in Europe and Australia where cars more than pay for their costs people still drive a lot. This is with all the effort put in to public transport in Europe.
How are you coming to the conclusion that cars are paying their fair share of costs? I'm not familiar with Australian politics at all, but a quick look found that local governments pay most of road maintenance, not the fuel excise tax[1]. Another hidden cost of cars is that they decrease density of cities and suburbs, which causes all other infrastructure to also get more expensive (sewage, gas, power, etc).
Public transit isn't all, just being denser so that biking and walking is more viable is also a big part to why European cities aren't concrete wastelands full of parking and roads. The normal way to go and buy groceries is to walk not drive.
Cars don't pay for their costs and it's not close. Fuel tax doesn't even cover a small fraction of infrastructure cost in most European countries. Building roads is heavily subsidized from federal budgets, land given for free, accident costs covered by public money etc. etc.
These transport options—more notably for cars, but everything else too—are still heavily subsidized in the sense that we’re allowing them to ignore the cost of cleaning up after them, or the cost of climate change (if they aren’t cleaned up after). If we stop that theft from everybody’s grandkids, the economics might get some people to switch over to public transit at least.
But it is really easy to steal from these people, they are tiny babies or not even born yet, they can’t vote. Like stealing candy from a baby, except the candy is their planet’s ecosystem. Sucks to be them, I guess.
Interesting point. Why don't you think this is true in more highly developed countries? Two example come to mind: The "seal" you must buy in Suisse, and most high speed roads in Japan are rolled.