Victoria holds up $2.2b in Suburban Rail Loop funds, auditor finds

The Allan government is yet to convince the Commonwealth that its flagship Suburban Rail Loop East project is worth building, with its failure to submit a credible business case holding back $2.2 billion in promised federal funds.

In a report published on Wednesday, national acting Auditor-General Rona Mellor said the Albanese government’s funding commitment to the $34.5 billion rail line had not been formally approved, more than two years after it was included in the federal budget.

Premier Jacinta Allan and Minister for the Suburban Rail Loop Danny Pearson at the Box Hill construction site in July. Credit: Penny Stephens

“As at June 2024, SRL East had yet to go through the formal project approval process, and the department is awaiting a project proposal report from the Victorian government,” the report says. “This process must occur before funding can be expended.”

Federal Infrastructure Minister Catherine King has previously said Victoria’s request for a further $9 billion would be contingent on an assessment from federal advisory body Infrastructure Australia.

But the report shows the Albanese government’s $2.2 billion commitment also still depends on a positive assessment from federal bureaucrats.

Major work is under way on the Cheltenham to Box Hill underground rail line, and the first $3.6 billion contract has been signed for tunnelling to start in 2026.

The proposed Suburban Rail Loop.Credit: Supplied

Prime Minister Anthony Albanese pledged $2.2 billion for the Suburban Rail Loop East in the lead-up to his May 2022 federal election victory. Those funds were included in its 2022-23 budget, with $400 million to be available this financial year, $1 billion in 2025-26 and $800 million in 2026-27.

That funding schedule was pushed back by a year in December 2023, with the first $400 million to be released from July 1, 2025.

However, the Australian National Audit Office report found the SRL had gone through only the first stage of a four-stage process required for any payments to be made.

Victoria was due to submit a project proposal report by the end of 2024 for assessment and needs to submit a new business case to Infrastructure Australia for evaluation, it says.

Infrastructure Australia told the Department of Infrastructure in September 2021 that the SRL business and investment case showed “strong strategic rationale for SRL”.

However, the business case did “not present a reasonable investment” because it lacked detail about design, risk, funding, information about how benefits were calculated, and whether alternatives to the 26-kilometre underground rail line were considered, the adviser found.

Infrastructure Australia told the auditor-general in March that it “had not been advised of a timeframe for when the Victorian government will submit its [revised] business case for assessment”.

The Age revealed last month that Victoria has, over two years, repeatedly ignored Infrastructure Australia’s requests for more details about the SRL for it to assess.

The audit says the Albanese government rejected a request from Victoria for more SRL funding in the 2023-24 budget because Infrastructure Australia was still waiting on an updated business case.

It rejected another request in the 2024-25 budget because of concerns about the SRL’s final budget.

Federal Infrastructure Minister Catherine King wrote to her Victorian counterpart to say she had deferred decisions on funding requests for some projects – including SRL East – “where further detail was needed … [or] where it was unclear if the costs have been fully realised and reflect a definitive final cost for the project”.

SRL East, which former premier Daniel Andrews unveiled in the lead-up to the 2018 state election, will run from Cheltenham to Box Hill by 2035.

An artist’s impression of how the area around the SRL’s Clayton station might look.

The state government’s original 2018 pitch to voters was for a 90-kilometre orbital loop connecting to Melbourne Airport and Werribee, but there has been no detailed planning or commitment for future sections through the northern and western suburbs.

Victoria has committed $12 billion to the SRL East and has based its business case on the Commonwealth eventually matching that commitment, while hoping to raise the same amount again from unspecified “value capture” property charges.

Victoria’s auditor-general has previously been critical of the taxpayer-funded project, which was developed in secret.

More recently, the Coalition and some Labor MPs in Melbourne’s north and west have raised concerns about the state’s ability to fund other infrastructure projects.

Victoria has the largest debt of any state. This year’s budget papers suggested the state’s net debt would rise to $187.8 billion by June 2028.

Start the day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.