Victorian taxpayers are an unlucky lot. After forking out many billions of dollars on the Labor Party’s hideously expensive desalination plant and the Myki public transport ticketing project – in a forlorn bid to keep the population growth monster at bay – they are now facing a huge bill to scrap the previous Napthine Liberal Government’s wasteful East-West Link tunnel project.
As reported in The Age today, the new Labor Government is seeking to settle with the East-West consortium partners in a bid to extricate itself from the project – a move that could cost Victorian taxpayers as much as $1.1 billion in compensation payments.
At his National Press Club speech on Monday, Prime Minister, Tony Abbott, went to great lengths to chastise the Victorian Labour Government for wasting taxpayer funds on “not building a road”. However, what Abbott did not acknowledge was that the former Victorian Liberal Government failed badly in its due diligence over the project and rushed to sign a deal with the consortium partners that would have left Victorians worse-off.
One only needs to examine the full business case for the East-West Link, released by the new Labor Government after the November State Election, to see just how poorly the project stacks-up. Consider the following damning facts:
- The initial business case showed that the benefit to cost ratio was only 0.45. Therefore, for every dollar spent on the project, the return would be only 45 cents. This was consequently massaged by the former Napthine government using a number of dubious economic forecasting methods to make the project appear more palatable.
- The road would be so expensive to build (estimated total cost $15-18 billion) that it would take 56 years to pay-off. This is significantly longer than previous road projects such as CityLink (eight years) and EastLink (20 years).
- The most extraordinary revelation in the 9000-page full business case is a note to cabinet observing that a full submission of the business case to the independent umpire Infrastructure Australia disclosing the low benefit-cost ratio “may be used as a justification for not supporting the project”.
It is despicable that the former Liberal Government failed to disclose the facts from the full business case to the public before the construction contracts were signed. It is even more disgusting that they hastily proceeded to sign the contracts on the project to beat the artificial November election deadline, in the process exposing Victorian taxpayers to two painful alternatives:
- Proceeding with the project at great cost and negative returns; or
- Abandoning the project but paying $1.2 billion in compensation to the construction consortium.
Some choice! You would be hard pressed to find a worse example of infrastructure incompetence than the East-West Link project.
I only hope the new Labor Government can do a better job on infrastructure than its recent Labor and Liberal predecessors.
