I have repeatedly labelled the 90-kilometre Suburban Rail Loop (SRL) the worst infrastructure project Australia has ever seen.
This project was the thought bubble of former Premier Daniel Andrews announced in the lead-up to the 2018 State Election.
The full three states of the SRL were initially announced to cost $50 billion, but the cost has since ballooned to more than $200 billion to build and operate the project.
The project was never properly costed before its announcement, no cost-benefit analysis was done, and the state’s infrastructure department was not even informed of it prior to its announcement.
In short, the SRL project was a complete failure of due process and policymaking, brought to us by an omnipotent Premier.
Over the past few weeks, we have witnessed the world’s two largest rating agencies—S&P and Moody’s—warn that Victoria faces further credit rating downgrades if it proceeds with the SRL.
Their concerns have been backed up by the Victorian Parliamentary Budget Office (PBO) and the Australian National Audit Office (ANAO), which have derided the project.
The PBO has concluded that every $1 spent on building the first two stages of the SRL (60 kilometres) would result in social benefits of between $0.60 and $0.70.
The discount rate used by the PBO is the same as the one used by Treasury for public transport, but different from the more generous rate used by the government in its project business case.
“Investment in SRL East and North would definitively realise a net cost to society”, the PBO report says.
The PBO also estimated that the first two stages of the project will cost about $96 billion, while the cost of operating the rail link over five decades will be around $120 billion.
Meanwhile, the Australian National Audit Office (ANAO) reported on Wednesday that the business case Victoria used to request $11.5 billion in federal funding for the first stage of the SRL contained information gaps and used a dubious methodology to calculate the project’s benefits.
“The analysis [identified] issues such as uncertainty in the assumptions used in the business case and that further work was required to have confidence in the funding and rationale of the project”, the ANAO report said.
The ANAO said that the SRL did “not present a reasonable investment” and would likely require other projects to be delayed to make room if the funding were approved.
Victorian Premier Jacinta Allan should never have ignored expert advice and signed contracts to build the first stage of the SRL.
Victoria is already drowning in debt with the lowest credit rating in Australia and a ballooning interest bill.
The SRL will plunge the state deeper into debt, likely resulting in further credit rating downgrades and a higher interest burden.
The project will also divert decades of funding away from the state’s growth areas, starving them of much needed infrastructure and services.
Thanks to the incompetent Labor government, Victorians are on a one-way track to financial crisis.
