Suburban Rail Loop to cost more than it’s worth, report finds

Daniel Andrews’ signature rail project will cost Victorians far more than it is worth in benfits to the public, state parliament’s independent budget watchdog has found.

The Suburban Rail Loop is Premier Daniel Andrews’ signature rail project. Picture: Andrew Henshaw

Premier Daniel Andrews’s signature rail project – the $125 billion Suburban Rail Loop – will cost Victorians far more than it is worth in benefits to the public.

The state parliament’s independent budget watchdog has also found the controversial rail line would cost an additional $75 billion to run in coming decades.

A report by the Victorian Parliamentary Budget Office, to be released on Sunday, found the project did not stack up in a cost-benefit analysis.

It comes a week after the watchdog found the cost of the Suburban Rail Loop would blow out to $125 billion – more than double its original $50 billion price tag.

Shadow Treasurer David Davis said the SRL would be “a massive albatross around the taxpayers necks and the crisis in the health system ahead of pie-in-the-sky projects.”

Mr Davis said the BCR should “chill Victorians”.

“Our position is clear – real solutions to fix to the health crisis now or an overpriced rail line we don’t need that will arrive in 13 years.”

The Victorian Parliamentary Budget Office found the SRL would cost an additional $75 billion to run in coming decades.

The newly released operating cost would put the project’s total spend at $200 billion.

Opposition Leader Matthew Guy asked the budget office to calculate if the government’s proposed railway between Cheltenham and Melbourne Airport represented value for taxpayers in May.

The office’s new report says the project represents “a net social cost” to society.

Calculating a benefit-cost ratio for the project where a value of 1 represented a net benefit to society, the PBO gave stage one of the project from Cheltenham to Box Hill a rating of 0.6 and the second stage to the Airport 0.7.

The PBO estimates the cost to build and operate the railway between Cheltenham and the Airport will be $200 billion to 2084–85, made up of asset works costing $125 billion and operating expenses of $75 billion.

Earlier this month the state opposition announced it would shelve the first stage of the project between Box Hill and Cheltenham and redirect the money towards the state’s hospital system.

But the government remains committed to the project, as well as the Box Hill to the Airport section, though it has made no firm funding commitment to the project.

The Andrews government has so far allocated $11.8 billion for the project, including $2.2 billion for early works.

It would be reliant on funding from the federal government, which has so far only committed to about $2 billion.

The PBO calculated the BCR on continued investment in the project by “discounting estimated future costs and benefits into today’s dollars, and then dividing the value of discounted benefits by the value of discounted costs.”

To do this they “accepted at face value” a February 2021 KPMG economic appraisal commissioned by the Government updated to 2022 values.

They then applied the same methodology used by the federal government agency Infrastructure Australia to calculate social benefits.

The SRL was first announced in 2018 without a business case, with planning and initial works beginning 2019 with construction of the first stage commencing this year.