Roads, railways and dams in firing line amid efforts to repair battered budget

Tens of billions of dollars’ worth of infrastructure projects used by the Coalition to woo voters at the federal election could be axed or wound back as the new government seeks to bring the federal budget under control.

Two long-term mega-projects to which the federal budget has dedicated a combined $5.2 billion – the East West Link in Melbourne and the Perth Freight Link – are already under scrutiny while money promised to regional communities could be held back to help reduce the size of the budget deficit.

The original plan for the East West Link through Melbourne. Despite being rejected by the Victorian government, it and the Perth Freight Link sit on the federal budget.

The incoming federal government has inherited a budget forecast to show a deficit of $80 billion this financial year and $78 billion in 2022-23. Gross debt is at $888 billion, on track to reach $1.2 trillion within three years, while interest rates on outstanding debt are climbing.

The Coalition used the March 29 budget to announce more than $20 billion in additional infrastructure spending. That included almost $4 billion on rail projects in NSW and Queensland, $3.1 billion on freight terminals around Melbourne and $7.4 billion on dams and irrigation projects.

But many of the projects have yet to be vetted by the government’s own adviser, Infrastructure Australia. Some have already been found to cost more than they would deliver in economic returns.

The East West Link and the Perth Freight Link projects have been in a budget no-man’s land for several years, with the Victorian and West Australian governments not proceeding with either.

The East West Link has been in the federal budget since 2016-17 when $3 billion was set aside “for the first Victorian government” prepared to build the contentious project. In the 2020-21 budget, the allocation was increased to $4 billion in recognition that the likely cost had grown.

It’s a similar situation in WA, where the Perth Freight Link was allocated federal funding in the 2014 budget. The project was scrapped by the new state Labor government in 2017.

The federal budget has set aside $1.2 billion for the Perth project since 2017. Despite the increase in construction costs since then, the allocation has not increased.

Finance Minister Katy Gallagher revealed she had been briefed on the East West Link and the Perth Freight Link projects and the cash for both is listed in the budget as contingent liabilities. A decision on both would have to be made after talks with the relevant premiers.

Gallagher said the “huge” infrastructure program, worth $120 billion over 10 years, had to be examined closely. Much of the expenditure has been earmarked for the second half of the decade.

Finance Minister Katy Gallagher with Treasurer Jim Chalmers. Both are overseeing a “line by line” examination of budget spending.Credit: AAP

“I think we need to have a really close look at that: whether those projects are on track, how many of them have had business cases, what stage are they all up to,” she said.

“It’s certainly on [Treasurer Jim Chalmers’] and my radar. It’s just probably too early to tell about how long that would take and the decisions that would need to be taken.”

The new government is already examining some projects. The budget committed $5.4 billion to the Hells Gate Dam in the north Queensland seat of Herbert. Before the election, Labor said it would delay that project, for which a final business case has yet to be completed, for a year.

Grattan Institute’s transport and cities program director Marion Terrill says all infrastructure projects should be vetted to ensure they are providing value for money.

Grattan Institute transport and cities program director Marion Terrill said that at the very least the new government had to audit all infrastructure projects to ensure taxpayers were getting value for money.

She said there were question marks over a promised $1.2 billion freight terminal outside Melbourne in the seat of McEwen, over the $1 billion promised to upgrade the rail line to the NSW seat of Robertson and over a $2.2 billion planned road upgrade in Perth.

The Coalition had also promised $1.6 billion in the budget – to be matched by the Palaszczuk government – towards a north coast rail line from Beerwah to Maroochydore.

Infrastructure Australia rejected this proposal, which formed part of a $5.3 billion broader project, in 2020 after finding its cost outweighed its benefits while noting there was “challenging terrain” in sections of the proposed route.

Terrill said that along with the East West Link and the Perth Freight Link, the new government had to seriously question all the money promised to projects.

“I wouldn’t proceed with any of these large projects until they’ve been properly examined. We’re already seeing cost blowouts on existing projects and there’s more competition for labour and inputs,” she said.

“The fact you’ve got projects sitting on the budget as contingent liabilities – it’s being treated as if it’s being spent in Victoria or WA when it’s really just a rhetorical device to push up the government’s spending.”

Prime Minister Anthony Albanese said the audit by Treasury and Finance was already under way.

“This is a budget that’s full of waste and rorts. And we’re going to search for them, find them line by line, and where there is waste that we can act upon we certainly will do so,” he told Sky News on Sunday.

“This government abused the system of the contingency reserve to create these pots of money that were there just to be used for political purposes and we need to do better than that.

“We need to get to work to make sure that every dollar of expenditure is regarded as the precious commodity of taxpayers.”

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