Bombshell report finds Suburban Rail Loop projected to blow out by $16bn

The cost of building and running parts of the rail loop is now expected to cost a whopping $216bn, sparking claims the Allan government doesn’t “understand the project they’re building”.

The cost of building and running the Allan government’s new underground rail loop through middle Melbourne for five decades has blown out to $216 billion, an independent analysis shows.

Parliamentary Budget Office estimates show the first two stages of the Suburban Rail Loop – between Cheltenham in Melbourne’s southeast and Tullamarine Airport – will cost about $16bn more than was forecast in a 2022 assessment.

The updated cost includes a $9bn blowout in construction and maintenance, which are blamed on rising costs and supply chain shortages, and now expected to cost $134bn.

The report from the PBO, which provides advice to parliamentary parties on major policies, is an update to its 2022 analysis that was commissioned by the opposition ahead of the last state election.

A bombshell report has revealed the cost of building and running the Suburban Rail Loop from Cheltenham to Melbourne Airport has blown out by $16bn. Picture: NCA NewsWire

The cost of running the trains on the first two stages of the project over the next 50 years – including paying for rail staff and drivers and back office operations – is also likely to increase by $7.5bn to $82.7bn.

When announcing the SRL concept in 2018, the state government said the total cost for the entire 90km “loop” could be about $50bn.

A business case later showed the first stage – a 26km tunnel between Cheltenham and Box Hill – would cost $30-34.5bn.

The state government has set aside $11.8bn to build the city-shaping project, which it would use to transform middle suburbia with high rises and thousands more homes around six new stations at Cheltenham, Clayton, Glen Waverley, Monash, Burwood and Box Hill.

A design of the Monash Station as part of the Suburban Rail Loop.

It has been promised $2.2bn from the Albanese government, but its business case was predicated on getting a third of the project’s funding from the Commonwealth and a third from “value capture” that could be a levy on increased land values.

The PBO assessment looks at the first 50 years of operations for the SRL, in line with the government’s business case.

Its predicted $216bn price tag is only for the first two stages of the Loop, and does not include the final phase proposed for Melbourne Airport to Werribee.

Premier Jacinta Allan, previously the Minister responsible for the Suburban Rail Loop, has said the government “can’t afford not to build” the project, but that it would be up to future governments as to whether they proceed with other stages.

The state opposition has vowed to pause work on the Suburban Rail Loop if elected to government in 2026.

An artist's concept of a Suburban Rail Loop at Cheltenham. Source: Suburban Rail Loop Authority

Opposition leader John Pesutto said he was prepared to ditch the project completely if it was impacting other funding priorities.

“Labor cannot manage money, cannot manage projects and every Victorian is paying the price,” he said.

“This is a project Victoria simply cannot afford. A Pesutto government will pause and review this project and prioritise long overdue basic infrastructure in communities that have been neglected by Labor for decades.”

Opposition transport infrastructure spokesman David Southwick said Victoria couldn’t afford to put “all our eggs in one basket”.

“Under Jacinta Allan’s ‘things cost what they cost’ attitude, major projects have suffered more than $38bn in cost blowouts and counting,” he said.

Late last year, outgoing Ombudsman Deborah Glass warned significant taxpayer funds were at risk of being wasted because the development of the project lacked “rigorous” independent scrutiny.

Senior Minister Lily D’Ambrosio on Wednesday claimed the figures were “dodgy” because they included operating costs, as well as construction and maintenance costs.

“They are about construction costs, plus running and operating costs and renovations and a whole bunch of other things to give them inflated figure,” she said.

Ms D’Ambrosio refused to guarantee the project would be completed on time and on budget.

Instead, she noted the government remained committed to the project which she said would deliver “a world class service to Victorians”.

Mr Pesutto responded by saying the government’s criticism of the inclusion of operating costs was “further proof they don’t understand the project they’re building”.

“Of course you have to take operational costs into account,” he said.

“You’ve got to give the Victorian people a clear indication of what things will cost not only to build, but to operate as well.”

He urged the government to release their own figures for the mammoth project.

“We would absolutely call on them to produce whatever materials they are relying upon to contest these figures,” he said.