Dutton pledges to axe $2.2 billion from Suburban Rail Loop ‘hoax’

The major parties have formally split over the future of the Suburban Rail Loop, with the federal Coalition vowing to scrap all funding for the project and redirect the money to building a rail line to Melbourne Airport.

Opposition Leader Peter Dutton and infrastructure spokeswoman Bridget McKenzie will announce in Melbourne on Tuesday that if elected, they will withdraw $2.2 billion in federal money previously committed to SRL East, the first stage of the long-term project.

Victorian senator Bridget McKenzie with Opposition Leader Peter Dutton in Melbourne last year.Credit: Eamon Gallagher

A Dutton government would also withdraw $2 billion in funding from a proposed $4 billion upgrade of Sunshine station and its surrounding rail yards jointly announced in March by Prime Minister Anthony Albanese and Victorian Premier Jacinta Allan.

From the money saved, an additional $1.5 billion of federal funds – to be matched by a state Coalition government – would be used to complete funding for the $13 billion Melbourne Airport Rail.

Dutton will pledge that all remaining money previously earmarked for the SRL and Sunshine station would be reinvested in Victoria’s other infrastructure needs.

“The Airport Rail is a long-overdue piece of transport infrastructure vital to the future growth of Melbourne, and a Coalition government at both levels of representation will make it a reality,” Dutton and McKenzie said in a statement provided to this masthead.

“A Dutton Coalition government will prioritise the Melbourne Airport Rail and cancel the Albanese government’s $2.2 billion commitment towards Jacinta Allan’s $200 billion Suburban Rail Loop, which is an unfunded, cruel hoax of a project.”

The decisive campaign intervention against the SRL, which cements federal and state Liberal and National opposition to the contentious, orbital rail loop, elevates infrastructure priorities to a front-line choice for Victorian voters.

It also makes Airport Rail the flagship major project for the Coalition parties in Victoria.

The Allan and Albanese governments have so far committed $5 billion each to Airport Rail. It has been priced between $10 billion and $13 billion. Since 2022, when its business case was released, construction costs have continued to soar.

The proposed Suburban Rail Loop route.

Federal Labor committed $2.2 billion towards the SRL during the 2022 election, but this year, armed with Infrastructure Australia reservations about the project, restricted the money to funding “tangible elements” that could provide benefits even if the project does not go ahead.

Infrastructure Australia recommended no further federal funding be provided to SRL East, a $34.5 billion train line that would run beneath Melbourne’s eastern suburbs between Cheltenham and Box Hill, until it was re-costed and more information was provided about how the Victorian government proposed to fund it.

In refusing to fund the SRL, Dutton makes explicit concerns shared by Infrastructure Australia and – more privately – the Albanese government about the Victorian government’s heavy reliance on value capture to fund a third of the project and the methods used to arrive at its claimed cost-benefit ratio.

Until this point, the federal opposition had been highly critical of the project without stating it would withdraw funding for it.

A Suburban Rail Loop worksite at the corner of Clayton and Carinish roads in Clayton. Credit: Joe Armao

No Commonwealth funds have been sunk into the SRL, which is contracted to start tunnelling its first stage next year. Senate estimates in February heard the Commonwealth was negotiating milestones for when it would actually pay Victoria the $2.2 billion it has previously committed.

The Albanese government has budgeted $400 million to be spent in 2025-26, $1 billion in 2026-27 and $800 million in 2027-28.

The timeline means most, if not all, of the $2.2 billion could still be withdrawn.

Dutton’s campaign pledge to withdraw funds from the proposed upgrade of Sunshine station is more complicated. The opposition leader claims that Sunshine, a hub station on the proposed airport rail line and a future stop on the final, western stage of the SRL, can be funded from within the current Airport Rail budget.

This is likely to be disputed by the Victorian government, which says the $4 billion price tag for Sunshine is required to separate about six kilometres of tracks that carry regional, metropolitan and freight trains in and out of Sunshine and make provision for Airport Rail.

In November, Dutton vowed to make the SRL a central campaign issue but did not declare at the time that he wanted to cancel the project. Some federal Liberal MPs have been reluctant to firmly oppose the SRL in case it sparks a backlash from constituents whose house prices might benefit from the project.

“We’re happy to provide support to projects, but not if the state government has no hope of putting their own money in,” Dutton said at the time.

Since then, Infrastructure Australia’s report has increased doubts over whether the Victorian government can deliver on its expectations to raise $11.5 billion for SRL East through value capture, taxes and charges on the improvements to land values and other benefits from the project.

The Allan government has ruled out taxes on the family home through value capture, meaning most of the revenue would need to come through commercial properties or by means such as developer charges.

“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,” Infrastructure Australia’s evaluation says.

Victorian opposition leader Brad Battin last week called for SRL East to be cancelled now, but says the state Coalition will need to assess in 2026 how much work has been completed or is under way before deciding what to do with the project if the Coalition wins government.

Federal shadow treasurer Angus Taylor told the ABC last week that the rail loop was a “boondoggle” and that the $2.2 billion in federal funding was going towards a project that had been assessed by independent state and federal agencies and didn’t appear to stack up.

“Our lack of support for that spending is pretty clear, but I’m not going to pre-empt [his cabinet colleagues],” he said at the time.

“We’re sending a pretty strong signal that we don’t think this stacks up.”

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