Melbourne’s Suburban Rail Loop (SRL), a 90-kilometre (56-mile) rail line beginning at Cheltenham in the city’s southeast and looping through the eastern, northern, and western middle suburbs to Werribee in the southwest, is already estimated to cost billions more than first proposed.
Initially estimated to cost $50 billion (US$34 billion) for the entire project, recent reports indicate that the first two stages alone will cost some $125 billion. The new costings were made by the Parliament’s Budget Office in August 2022.
The SRL has been criticised recently by the State’s Ombudsman Deborah Glass. Created by a former ministerial staffer at Development Victoria, its working-up was kept secret from department officials and infrastructure experts.
Ms. Glass found the development of the project bypassed normal policy processes, with consultant PwC engaged to “prove up” the merits of the project.
“It was subject to excessive secrecy and ‘proved up’ by consultants rather than developed by public servants,” she said.
“Its announcement ‘blindsided’ the agency set up by the same government to remove short-term politics from infrastructure planning. The lack of rigorous public-sector scrutiny over such projects before they are announced poses obvious risks to public funds.”
Cost blow-outs are endemic in Victoria.
It was revealed recently that the expected cost of the 11-kilometre North-West link had increased from $15.8 billion six years ago to a staggering $26.1 billion today. Even the $15 billion was above the initial estimates for the project.
This project, which joins the gap between the Northern Ring Road and the Eastern Freeway tunnelling under the Yarra River at Bulleen—which will hasten travel times, relieve traffic through suburban areas, and channel heavy-duty haulage—has a sounder rationale than the SRL. However, it reveals the scale of cost inflation on major projects in Victoria.
Some of this is due to the general inflation in the economy, but much is also due to the spiralling wage costs in Victoria.
Crippling Cost for Returns
Melbourne’s transport system is built on a hub and spine network, with both trains and trams running from various locations on an inner and outer metropolitan “clock” to the CBD. Criss-crossing this spine is a network of bus services, connecting various rail stations and tram stops, creating an integrated system.
This public transport network is augmented by a series of major freeways and roads forming a grid across greater Melbourne.
According to the SRL Authority, “Three transport super hubs at Clayton, Broadmeadows, and Sunshine will connect regional services, so passengers outside Melbourne won’t have to travel through the CBD to get to employment, world-class hospitals, and universities in the suburbs.”
“SRL is more than a transport project—it will help reshape how our city grows in the decades ahead. The areas around the new stations will be thriving communities for people to live, work, study, and play—with more diverse housing options, local services, and jobs closer to where people want to live and all a short distance from a train station.”
Indeed, the case for the loop is not so much the transport connections, but the transformation of Melbourne into a “city of centres” and moving population expansion from the southeast to the west and northern west of the metropolitan area.
The extent to which this will occur is speculative. The claimed key benefits are to increase Victoria’s productivity and economic growth; improve connectivity; and improve the city’s liveability.
Although there are various KPIs listed, identifying the exact impact of the SRL will be a matter that can only be assessed in the future. As will be the extent to which the growth of further suburban centres can be attributable to the SRL.
There are a number of ongoing concerns about the project.
First, the cost increases to date have been accepted before the project even commences. It was only last week that the government signed a $3.6 billion contract to commence the project during the life of a three-decade-long construction.
Secondly, there is little assurance of “value-for-money” for the Victorian taxpayer. When elected at the end of 2014, the Labor government inherited $22 billion in debt, about 6 percent of gross state product. By 2026-27, the debt will be 25.1 percent of gross state product.
Net debt per household will grow to $68,300. Taxpayers will be paying $24 million per day in interest payments!
The state debt is expected to increase to $178 billion by 2027—a massive burden on taxpayers, who will inevitably pay higher taxes and charges to reduce it.
Yet the Allan Labor government has pressed on, signing new contracts, as if oblivious to the financial burden on Victorians.
