Victoria is the most indebted state in Australia, with the lowest credit rating.
Victoria’s net debt is projected to skyrocket in the coming years, which is expected to result in additional credit rating downgrades.
When these downgrades occur, interest payments will skyrocket, increasing costs for Victorians and resulting in more taxes and less funding for infrastructure and services.
The Suburban Rail Loop (SRL) project is a major source of budget pressure in Victoria.
The overall cost to build and run the three stages of the SRL is expected to top $200 billion.
The 2023-24 Victorian state budget projected that the first SRL stage alone would cost around $34.5 billion, but only $11.8 billion of funding had been locked in.
Source: Victorian Budget 2023-24
The Victorian government incorrectly assumed that the federal government would contribute around $11.5 billion to the project, with the remaining funding to come from additional state revenue raising via “value capture”.
However, the Australian National Audit Office (ANAO) stated that the business case used to request the $11.5 billion in federal funding lacked critical facts and employed questionable methodologies to assess the SRL’s net benefits.
The federal government has only agreed to spend $2.2 billion on the project and is unlikely to provide more.
The Victorian government has faced repeated warnings from credit rating agencies that it faces damaging downgrades if it persists with the SRL without securing further federal government funding.
The upshot is that the SRL is an unfunded boondoggle project that will bury the state deeper in debt, causing further credit rating downgrades, escalating interest payments, higher taxes, and less expenditure on other necessary services and infrastructure.
The big swing against Labor in its traditional ‘heartland’ of Werribee in Saturday’s byelection has prompted concern within the party about its implications for the state election in November 2026.
The dearth of transport infrastructure in Melbourne’s west emerged as a key issue during the byelection.
Sources have indicated that a cross-factional group of Labor MPs in Melbourne’s west and north are planning to lobby Premier Jacinta Allan to put the SRL project on hold and redirect funding to their electorates.
“At the top of the MPs’ list is pausing the SRL and diverting funds to the north and west of Melbourne”, the Herald-Sun reported.
“A growing number of MPs, including [deputy premier Ben] Carroll, believe the $34.5 billion SRL should be scrapped or paused because they fear it is hampering the government’s efforts to drive down debt and invest in health and education”.
“They’re at the point where they’ll struggle to win the election if the push on with the project, and they’ll struggle to win the election if they scrap it”, one senior Labor figure said.
Talk about shutting the farm gate long after the horse has bolted.
Infrastructure experts advised the government not to proceed with the SRL project because it was unaffordable and the benefits did not outweigh the costs.
The independent Parliamentary Budget Office (PBO) estimated that every dollar spent on the first two stages of the SRL (60 km) will result in social benefits ranging from only $0.60 to $0.70.
Premier Jacinta Allan stubbornly ignored this expert advice and signed the first major tunneling projects for the SRL.
As a result, Victorian taxpayers are trapped in a no-win situation.
If the government proceeds with the SRL, state debt and interest payments will soar, taxes will have to rise, and precious funding will be diverted away from health, education, and more worthwhile infrastructure projects. Residents of growth areas in Melbourne’s West and North will be most severely impacted.
However, if the SRL is cancelled, then taxpayers will be liable for billions of dollars in compensation payments for breaking the contracts, alongside the large sunk costs of works completed to date.
Premier Jacinta Allen should face harsh consequences for the harm she has caused to the state by disregarding expert advice and forcing Victoria into this excessively wasteful and unnecessary project.
