Alarm over Suburban Rail Loop costings as infrastructure body cites need for ‘exit strategy’

The first stage of the Suburban Rail Loop should not receive any more federal funding without an updated cost estimate, Australia’s peak infrastructure body has declared in stating its low confidence in the Allan government’s $35 billion figure.

Infrastructure Australia on Friday publicly released its evaluation of SRL East, an underground railway line between Cheltenham and Box Hill planned to be completed by 2035.

A Suburban Rail Lop construction site in Clayton.Credit: Joe Armao

That report, provided to federal Infrastructure Minister Catherine King before she released $2.2 billion last month, recommends multiple tests be met before the Commonwealth provides more money.

It also suggests the state government develop “exit strategies” to provide a pathway to cancel or transition out of the project if it cannot be delivered at any stage.

The list of three different requirements for extra funding include an “updated and detailed cost estimate for SRL East and supporting station precinct interventions” and a cost-benefit analysis that demonstrates the line’s benefits.

“While some new additional information has been provided to support our evaluation of SRL East, the business and investment case does not provide disaggregated information to understand the specific benefits of SRL East, and its contribution to the overall SRL Program,” Infrastructure Australia says in its report.

The proposed Suburban Rail Loop.Credit: Supplied

“Based on the information provided, we have low confidence in the cost estimate for SRL
East, presenting a major risk to the SRL East project, and the SRL Program as a whole.”

Premier Jacinta Allan has previously stated the project stacks up. The business and investment case relies on cost-benefit analysis that includes the second stage of the project, SRL North, stretching from Box Hill to Melbourne Airport. Work on that section is not yet under way and not expected to be completed until 2053.

Infrastructure Australia’s analysis considers the benefits of both sections to be overstated and does not believe the government’s work is detailed enough to help the organisation understand the benefits of SRL East by itself.

The report said costing of rail and infrastructure work had been conservative but that the cost of construction had risen faster than these calculations anticipated and Infrastructure Australia expected total costs to have increased.

Progress on the Suburban Rail Loop site in Clayton late last year.Credit: Joe Armao

Victoria has done a large of amount of transport and precinct planning work, but Infrastructure Australia has not received “crucial project delivery details related to actual costs and the funding of the project”, which reduces its confidence the project could be delivered as planned.

Infrastructure Australia also recommended “a comprehensive funding and financing strategy” with analysis that details how value capture will fund one-third of its total cost.

The Allan government expects to pay for one-third of the project, while it forecasts another third should come from the Commonwealth and the remainder through charges collected on the improvement the project will make to land values, known as value capture.

The business and investment case for the rail loop floated car park charges, developer contributions and a potential levy on commercial properties that increase in value, but no commitments have yet been made.

“While we acknowledge the role value capture can play in funding infrastructure, there is insufficient detail in the submission to provide confidence that these mechanisms can provide such a large proportion of the required funding, presenting a major risk to the project,” the Infrastructure Australia report says.

It also said that if further federal funding was pledged, the Commonwealth should take an active role in the project include participating in whatever government body manages it.

The report creates a political risk for King and Prime Minister Anthony Albanese, who have vowed to listen to the independent infrastructure adviser if they commit any further funding to the rail loop as requested by Victoria.

A $2.2 billion pledge in the 2022 federal election will only go towards benefits that can be realised even if the project does not go ahead, such as land acquisition.

Other projects have progressed without recommendations from Infrastructure Australia, such as the proposed railway line to Melbourne Airport, which Albanese has backed to get underway but which the agency has said could be deferred.

Victorian Suburban Rail Loop Minister Harriet Shing said the project remained on budget and on schedule, and trains would be running by 2035.

“Assessing SRL East in isolation would provide an incomplete picture of its economic impact, as infrastructure and housing projects deliver benefits over decades – the benefits will become even greater with the delivery of SRL North, Airport and West,” she said.

“This is a project that will reduce travel times, ease congestion by taking cars off the road, and increase the housing options for Millennials who have been locked out of the housing market for too long.”

Opposition major projects spokesman Evan Mulholland said the report was a damning assessment.

“Infrastructure Australia’s report makes for sobering reading. If there was ever a case for this project to be paused, this is it,” he said.

“It confirms what every expert and every Victorian already knows – SRL East is a massive risk to the state’s budget and the broader economy.”

Federal opposition transport spokesperson Bridget McKenzie said it was an indictment that the report did not recommend any of the Commonwealth’s $2.2 billion go towards the “building a single kilometre of track” and called for funding to be halted.

“Far from endorsing the project, Infrastructure Australia is so worried about the viability of the project it has recommended to seek more information from the Victorian government on how to exit the project should it not proceed.” she said.

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