The helmet laws have had an effect on takeup of the scheme: apparently only 70 trips a day are being made on it, despite the 600 brand new bikes made available; i.e., the system is running at 0.5% capacity. The cycling lobby has been organising protests against the helmet laws; at one such protest, the police came out in force and fined everyone. The law is harsh, but it is the law.
It's not clear what the designers of the scheme were thinking; it's less than useful for tourists, who tend not to bring bike helmets with them or want to spend money on them. As for it being intended for long-term commuters, the fact that the bikes are all in the city centre makes that somewhat less than ideal. Anyway, unless the bike helmet laws are amended (and, with Australia being a car-centric society, this looks unlikely), it's likely that the scheme will be scrapped due to poor patronage. Meanwhile, those wishing to borrow a bike around the inner north may be well advised to go to the Little Creatures Dining Hall on Brunswick St. and borrow one of their fleet of Kronan fixies. They're free and come with helmets, though you'd want to get there early in the day as they tend to get snapped up quickly.
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