It’s difficult to see how the North East Link’s cost-benefit adds up given latest cost blowout

The business case for the North East Link — made when its price tag stood at $15.8bn — showed a benefit of $1.30 for every $1 spent. It’s difficult to see how that still stands.

Premier Jacinta Allan has overseen a massive budget blowout on the North East Link. Picture: David Caird

Building an 11km toll road between Bulleen and Greensborough is going to cost $26 billion.

Let that sink in for a moment.

That is almost $2.4bn per kilometre.

This is a disaster for the Government and for taxpayers.

It’s an official blowout of about $10bn from a 2018 price tag of $15.8bn, although when former Premier Dan Andrews floated the project in the long shadow of the East West Link debacle, he said it could be built for $10bn.

Much better value than the “dud” EWL that Andrews axed.

The North East Link is one of the most complex road projects ever built in Victoria, and includes a 6.5km tunnel and an incredible network of interchanges at the Easter Fwy at the southern end and the M80 at the northern end.

The North East Link will now cost at least $1.2bn a kilometre. Picture: Supplied

It will make a big difference for the state’s critical freight sector, as well as many motorists heading from Melbourne’s east to the north, and includes major upgrades across 35km of the Eastern Fwy.

But $26bn for one project? Come on!

The blowout is especially troubling in a week that the state signed on to build the Suburban Rail Loop Stage One, which we’re told will cost $35bn.

The SRL East is the most expensive rail project ever built.

The North East Link is the most expensive road project in history.

When the government released plans in 2018 for the North East Link’s southern interchange that will connect to the Eastern Fwy, it told industry the cost would be between $2bn and $3bn. The contract for that package is now $5.7bn.

The North East Link’s proposed upgrade for Koonung Creek Reserve. Picture: Supplied

Changes have been made to make it a bigger and better project, we’re told.

But will the sum of the parts of this project be worth it?

The business case for the North East Link, which put a price tag of $15.8bn on the mega road, showed a benefit of $1.30 for every $1 spent.

So for a $15.8bn project, it would return $20.54bn worth of benefits.

Perhaps those benefits have increased, but a revision of the business case is improbable.

Why would a government want to know what the true value of a taxpayer-funded project is, after all?

But if that benefit figure hasn’t shifted, then the road now has a Benefit-Cost ratio of 0.79, or a return of 79 cents for each $1 spent.

Victoria will own the tolling revenue from the road once it starts operating later this decade, which should tip some money back to state coffers.

Of course, taxpayers who choose to drive on the new road will be coughing up for that.

The Government will be hoping the traffic modelling in the business case isn’t as far off the mark as cost projections have been, because the way things are going, it will need every dollar it can get its hands on.