Late last year, Inside Story’s Tim Colebatch labelled Dan Andrews’ Suburban Rail Loop “the worst transport project Melbourne has ever seen”:
The government’s commitment to build the worst transport project Melbourne has ever seen: the so-called Suburban Rail Loop… Tunnels eat money, and the demand for this one is likely to be small. No business case has been produced, and no cost–benefit analysis, but it will cost taxpayers tens of billions of dollars…
It appears that this emerged from his political circle rather than from the railways, let alone transport economists. As originally presented, it was intended to run for ninety kilometres around Melbourne’s middle and outer suburbs, largely in tunnels, with a number of stations in the southeast but very few in the west. The cost was claimed to be $50 billion, which no one believed…
Building the Suburban Rail Loop means the government will not have the resources to take up other, more urgent projects such as the second line of the Metro, intended to run from Clifton Hill to the massive redevelopment site of Fishermans Bend…
The Suburban Rail Loop is the prime example of a problem that afflicts not only the Victorian budget but also Australian politics generally… governments focus on what they brand as their projects, and which projects are politically rewarding to announce, rather than on delivering services to us that provide the best bang for buck.
Now transport experts have questioned the rubbery ‘benefit-to-cost ratio’ of between 1.1 and 1.7 that has been belatedly ascribed to the project, arguing that it represents poor value for money for Victorian taxpayers [my emphasis]:
Transport economist John Stanley, the architect of Plan Melbourne, which is the policy framework underpinning the Suburban Rail Loop, said that figure should be much higher.
“With a project like this, that has so much uncertainty about what the cost will turn out to be, I would want a higher benefit-cost ratio than that,” Professor Stanley said. “I wouldn’t be comfortable with that BCR range to build a project like this”…
Transport planner William McDougal said the economic case for spending many billions of dollars on the loop needed to be “compelling”.
The business case said that just a portion of the project, about 60 kilometres between Cheltenham and the airport, would cost between $48.5 billion and $67.4 billion over the next 30 years, surpassing the government’s original $50 billion estimate for the entire build.
The questions over the business case come after an Age investigation exposed the lack of transport and economic planning on the major project when it was unveiled to voters by Premier Daniel Andrews three months before the 2018 election. Gag orders and a code name were used to keep the project secret from the state’s top transport bureaucrat and the agency charged with overseeing the project.
The project’s benefit-cost ratio was also calculated using unconventional parameters that made it appear more financially healthy…
Business cases typically show multiple benefit-cost ratios for a project under scenarios where 4 and 7 per cent discount rates are applied, but the business case for the loop only shows a single benefit-to-cost under the more favourable 4 per cent scenario…
The project’s benefit-cost ratio also includes wider economic benefits, which goes against official recommendations…
This entire project was back-to-front to begin with and is a textbook example of everything that is wrong with infrastructure provision in this country.
Standard due process would have required a proper cost-benefit analysis to have been undertaken before the project was approved and then announced. Instead, the project was announced first to give the Labor Government a shock-and-awe ‘announceable’ in the run-up to the State Election amid voter concerns about excessive population growth, as well as giving the appearance that the Government had the situation under control.
This project was never submitted for assessment by Infrastructure Australia or Infrastructure Victoria. There was no business case conducted before its announcement. And Victoria’s transport department wasn’t even told about the plan for fear that it would attempt to block the project from within government.
Now we have a rubbery ‘benefit-to-cost ratio’ produced years later based on creative accounting to inflate the project’s worth.
Let’s also remember that the Suburban Rail Loop is only one of many wasteful infrastructure projects under construction in Victoria.
The Auditor-General recently found that the Victorian Government has a “tendency to underestimate costs and over-estimate benefits” of major projects. This, in turn, “can have consequences for Victorians, such as delays in obtaining needed infrastructure or increased costs”.
In May, the Grattan Institute released a report, entitled “Megabang for megabucks: driving a harder bargain on megaprojects”, which also roasted the Victorian Government’s infrastructure waste.
Recent other examples of infrastructure waste and mismanagement in Victoria include:
- The West Gate Tunnel project, whose cost is likely to double its initial $5 billion price tag and is running years behind schedule.
- The level crossing removal project, which has blown out from up to $6 billion to more than $8 billion;
- The $11 billion Metro Rail tunnel, which has blown out by $2.74 billion; and
- North East Link, which was originally planned to cost $10 billion and was revised up to $15 billion.
In fact, Victoria currently has 117 projects valued at over $100 million, and over a quarter of them are behind schedule.
This shows that the Victorian Government is the home of waste, mismanagement and infrastructure pork.
