Key points
- Tuesday’s federal budget will include a $2.2 billion contribution to Victoria’s Suburban Rail Loop project.
- While some planned projects will be cut from the budget, Finance Minister Katy Gallagher justified the SRL funding, saying the project has a detailed business case that forecasts it will deliver a positive cost-benefit ratio.
- The SRL has not been assessed by Infrastructure Australia.
- A report by the Victorian Auditor-General’s Office cast doubts on the way it was assessed by the state government.
- The $2.2 billion to be allocated in the budget is just a fraction of the contribution the state government has stated it needs to secure from Canberra for the project.
Finance Minister Katy Gallagher has defended the Commonwealth’s decision to pour $2.2 billion into the Andrews government’s flagship Suburban Rail Loop in Tuesday’s budget, insisting the project rigorously stacks up with a “very positive” cost-benefit ratio.
The federal budget is expected to cut hundreds of millions of dollars from Victorian infrastructure projects promised by the former Coalition government, including $475 million for a rail line to link Monash University’s Caulfield and Clayton campuses and $110 million previously earmarked for the Wellington Road duplication, in Melbourne’s outer south-east.
Finance Minister Katy Gallagher is insisting Victoria’s Suburban Rail Loop has been rigorously assessed.Credit:Alex Ellinghausen
Gallagher told ABC Radio National the government had found $22 billion in savings in a budget audit.
“There’s definitely projects that we will be stopping,” she said.
But the federal government is adamant the Andrews government’s controversial Suburban Rail Loop project – a 90 kilometre orbital rail link running from Cheltenham to Werribee via the airport – has been rigorously assessed.
The Victorian government’s planned Suburban Rail Loop. The first stage, from Cheltenham to Box Hill, is expected to cost up to $35 billion.Credit:The Age
Prime Minister Anthony Albanese and Infrastructure Minister Catherine King earlier this month announced a $2.2 billion contribution to the first stage of the project, which runs from Cheltenham to Box Hill and is expected to cost up to $35 billion.
Asked whether this was a good use of spending, given the link hasn’t been assessed by the federal umpire – Infrastructure Australia – Gallagher said the Commonwealth had been working closely with the Andrews government, which had released its own business case. She said the project had a “very positive” cost-benefit ratio.
“This is one that we have been working with the Victorian Government on,” Gallagher said. “There is a very detailed business case that underpins this project and a very positive cost-benefit ratio for the project.”
She said the Victorian Government had also been talking to Infrastructure Australia about the project.
The first section of the Suburban Rail Loop is due to cost $35 billion and be finished in 2035.Credit:Jason South
But despite Gallagher’s insistence that the loop has been rigorously assessed, questions persist about whether it stacks up.
The Victorian Auditor-General’s Office last month released a report finding the project had not been properly assessed.
The state government’s business case estimated the project would return between $1 and $1.70 in benefits for every $1 invested.
But the auditor found the project would return a loss-making 51 cents for every $1 dollar invested when the benefits and costs were calculated in accordance with state Treasury’s guidelines, excluding so-called wider economic benefits and applying a more conservative discount rate, which is the interest rate used to translate future costs and benefits into current dollars.
The state budget, announced in May this year, detailed $11.8 billion of state government funding for the rail project. But the Andrews government has signalled it will need a much larger contribution than the $2.2 billion presently on the table from the Commonwealth for the project is to go ahead.
The state budget papers make it clear the government is banking on one-third of the first stage of the loop being funded by the federal government, and one-third coming from as-yet unspecified “value capture” provisions, potentially involving profits from commercial development opportunities around the new line.
That suggests at least a further $9 billion will be required from the Commonwealth in coming years.
Liberal senator Jane Hume accused Labor, which in opposition demanded projects were assessed by Infrastructure Australia before being funded, of double standards.
“If Labor are genuine about this idea of quality of spending … how an earth they could support a $2.2 billion investment in the [Victorian] suburban rail loop has us all scratching our heads,” she told ABC’s Radio National.
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