It is best to stop digging when you are in a financial hole.
The Victorian government is drowning in debt with the lowest credit rating in the nation.
The world’s two largest credit rating agencies, S&P Global and Moody’s, recently warned that Victoria faced further downgrades unless it controls its debt.
One year ago, newly appointed Victorian Premier Jacinta Allan ignored expert advice and signed the first major tunnelling contract for the $200 billion Suburban Rail Loop (SRL), locking taxpayers into funding the project.
Victoria’s 90-kilometre SRL is the state’s biggest and worst infrastructure project. It is the thought bubble of former Premier Daniel Andrews, who announced the project before the 2018 State Election.
The SRL was never costed prior to its announcement, no cost-benefit analysis was performed, and the state’s infrastructure department was not even made aware of it.
Andrews announced the SRL with an estimated price tag of $50 billion, which has since blown out to more than $200 billion to build and run the project.
Experts have widely denounced the SRL.
The Victorian Parliamentary Budget Office (PBO) 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. In other words, the project would reduce living standards.
The Australian National Audit Office (ANAO) warned 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 ANAO added that the SRL did “not present a reasonable investment” and would likely require other projects to be delayed to make room.
Then Victorian ombudsman Deborah Glass concluded that the SRL’s development “was subject to excessive secrecy … ’proved up’ by consultants rather than developed by public servants”.
Glass also said that the initial development of the SRL was “at odds with core aspects of the Westminster tradition”.
With this background in mind, it was disturbing to see that the Victorian government has awarded the second major tunnelling contract, thereby locking Victorians deeper into funding the project.
“Suburban Rail Loop (SRL) East is powering ahead, with the $1.7 billion contract awarded to build the northern section of twin tunnels between Glen Waverley and Box Hill”, the media release reads.
Premier Jacinta Allan added on Monday that the project is “locked in”, with tunnel work to start in 2026. “Early works are powering ahead, and two tunnelling contracts have been signed”.
“We are not wasting a moment”, she said.
“The reality is that there is just simply no stopping this project now”, Transport Infrastructure Minister Danny Pearson said.
Yet, the government still cannot say how the project will be funded.
The Victorian state budget stated that it expects the federal government to cover one-third of SRL East’s cost, with another third coming from extra state revenue raising — referred to as “value capture”.
Source: Victorian Budget 2023-24
However, there the federal government has so far refused to fund the project.
This prompted Victorian Opposition Leader John Pesutto to write a letter to the Prime Minister Anthony Albanese requesting an “urgent” funding update.
“The Allan Labor Government appears to be proceeding with the Suburban Rail Loop, despite a funding shortfall of at least $22 billion for the Suburban Rail Loop East stretch alone”, he wrote.
“I respectfully urge your Government to confirm whether you intend to fund the Suburban Rail Loop, and to convey to the Allan Labor Government the serious concerns regarding the viability of the project”.
“It is now reaching a stage of urgency where, as the Commonwealth Government, you must provide certainty to the Victorian people”, Pesutto wrote.
No amount of propaganda from the Victorian government can cover the fact that the SRL will drown taxpayers in debt, causing further credit rating downgrades and a higher interest burden.
Decades of funding will also be diverted away from Victoria’s growth areas, starving residents of vital infrastructure and services.
