Sources say the rail loop could be ‘rephased’ to unlock billions of dollars in funding and protect the state’s credit rating

The Suburban Rail Loop could be put on hold and the money allocated to other projects with very little electoral backlash, a polling company director says.

A senior Labor polling expert has warned against racing ahead with the controversial Suburban Rail Loop, amid a growing ministerial revolt over the project.

As pressure mounts to delay the $30-34.5bn first stage of the project by as much as five years, the government recommitted on Thursday to having it completed by 2035.

A spokesman said tunnelling was still scheduled to start in 2026, with passengers riding the rails within 12 years.

But the government explicitly refused to rule out adjusting construction timelines within that period to free up cash in coming years.

Jacinta Allan is facing calls to delay the $30-34.5bn first stage of project by as much as five years. Picture: Wayne Taylor

Multiple government sources told the Herald Sun the project would be “rephased” to unlock billions of dollars in funding and protect the state’s credit rating.

It follows mounting pressure from within Jacinta Allan’s cabinet and from credit rating agencies about proceeding without further federal government funding.

The federal government, which has contributed $2.2bn, has made clear its reluctance to inject further funds unless independent assessments showed it was “value for money”.

The Allan government has locked in $11.8bn, leaving a funding black hole of up to $20bn.

The federal government is reluctant to inject further funds unless independent assessments show it is ‘value for money’. Supplied

RedBridge director Kos Samaras, who helped run Labor’s successful 2014 and 2018 state election campaigns, said recalibrating or slowing down the mega project would create minimal backlash as long as a clear alternative plan was presented.

Mr Samaras, who is married to agriculture minister and northern suburbs MP Ros Spence, said the SRL East – a 26km tunnel from Cheltenham to Box Hill – was viewed by voters as a “nice-to-have project but it’s not a must-have”.

The Allan government cabinet is split over the rail project, which credit ratings agencies this week described as a risk to state finances and of going over budget.

While there is broad support for rezoning middle suburbs to allow for higher-density housing as population soars, some have raised concerns about one project in Melbourne’s southeast soaking up an excessive amount of the state’s infrastructure pipeline spending – at a time when state debt is set to hit at least $188bn.

The Allan government cabinet is split over the rail project.

The entire 90km SRL has not been costed but the state’s Parliamentary Budget Office says that the first two stages, between Cheltenham and Tullamarine, were likely to cost $134bn to build and operate over five decades.

Mr Samaras, who was the ALP assistant secretary and deputy campaign director from 2005-19, said Redbridge focus groups in the eastern suburbs, where people would directly benefit from the first stage of the 90km SRL, did not think it was essential.

At the same time focus groups in the western suburbs “genuinely feel abandoned” by the state government.

“They see a lot of things being built elsewhere,” he said.

“It should not be viewed as a risk to consider putting this project on ice.

“Governments will always be given licence by voters to change policy, as long as that change is for a reason.

“If slowing down or recalibrating the SRL policy occurs because of an alternative plan, be it to assist Victorians through this affordability crisis or even invest in other projects, there will be very little electoral backlash.

“The key here is having a plan that underpins the change of a policy.”

The state’s Parliamentary Budget Office says the first two stages, between Cheltenham and Tullamarine, are likely to cost $134bn to build and operate over five decades.

Mr Samaras said Victoria’s debt burden was significantly different compared to when former premier Daniel Andrews announced the project in the lead-up to the 2018 election.

“We’re almost dealing with two different planets,” he said.

Mr Samaras said the feedback from focus groups was that Victoria’s debt wasn’t of concern to people until basic services start to get cut.

“Cost of living is the number one, two and three issue,” he said.

One senior government source said there was now no doubt the project would be rephased.

Another said the move was not partisan, but a win for Victoria because it would keep credit agencies at bay and avoid a potential downgrading of the state’s credit rating.

Such a move would lead to increased borrowing costs of between 0.1 and 0.5 per cent and further drive up Victoria’s ballooning debt.

Industry sources said back-ending work would be relatively straightforward and would significantly reduce cost pressures in the short term.

But the government, which has earned an unenviable reputation for major project cost and time blowouts, would risk overshooting its 2035 deadline if it couldn’t strictly contain works.

“Trains on the Suburban Rail Loop will be taking passengers by 2035 and it will become one of the city’s busiest lines,” a government spokesman said. “Construction is well under way on SRL East between Cheltenham and Box Hill, with more than 1400 people working on the project ahead of tunnelling commencing in 2026.”