Transport minister rubbishes ‘dodgy’ Suburban Rail Loop costings

An independent analysis that found the costs of the Suburban Rail Loop outweigh the benefits is “dodgy” and the Victorian government’s plan still stacks up, the transport infrastructure minister says.

The Parliamentary Budget Office (PBO) said in a report the rail project would cost Melburnians more than it benefits them, with its east and north sections set to make between 60¢ and 70¢ on the dollar.

An early works site for the Suburban Rail Loop, which Transport Infrastructure Minister Danny Pearson says still “stacks up”.Credit: Paul Jeffers

The total net value would be a loss of between $7.4 billion and $10.6 billion, the PBO found.

The PBO noted its analysis had limitations and was based on a 7 per cent social discount rate – a figure Transport Infrastructure Minister Danny Pearson said was different to the “global rate” of 4 per cent. The social discount rate helps determine the value of investments from a social perspective, accounting for future benefits and costs.

The PBO said the rail loop’s east and north sections “would definitively realise a net cost to society” unless a social discount rate of 4 per cent was used and it included all expected benefits. The 4 per cent rate was the lower rate in Infrastructure Australia’s Assessment Framework, the office said.

Opposition Leader John Pesutto requested the analysis from the PBO.

“Whenever John Pesutto is in trouble, he cuddles up to the PBO and asks the same dodgy questions, and gets the same dodgy answers,” Pearson said on Thursday morning.

“With major infrastructure projects, you never factor in operating costs.

“It’s like saying, ‘We’re going to buy a house, but we’ve got to factor in 50 years of running costs [and] a lifetime of trips to Bunnings in order to work out what the cost is like.’ It is just a nonsense.”

Pearson, who is also the minister for the Suburban Rail Loop, rubbished the office’s findings, saying the project stacked up at $1.70 for every dollar invested.

The proposed Suburban Rail Loop.Credit: Supplied

However, the minister would not commit to providing Infrastructure Australia with all required documentation by the end of the year when pressed to do so on Thursday morning.

The national auditor-general determined on Wednesday that Victoria was holding up federal infrastructure funds.

Pearson insisted the delay had nothing to do with the Allan government wanting to keep its options open and delay or change the scope of the orbital rail loop.

“I’m happy to come before you every single day between now and 2026 and make it abundantly clear that we are not for turning. We are not quitting. We are not stopping,” Pearson said.

Despite that rhetoric, there are some Labor MPs in Melbourne’s northern and western suburbs – the party’s traditional heartland – who fear SRL spending is hampering the government’s ability to pour money into infrastructure projects in their electorates before the next election.

Deputy Opposition Leader David Southwick said the cost-benefit analysis painted a clear picture of the “financial disaster” unfolding under the Allan government.

“The Suburban Rail Loop is an underfunded, reckless project that simply doesn’t stack up,” Southwick said.

“This government wants to pursue their pet project at the expense of everything else. I think that rings alarm bells for Victorians.”

Southwick added that Pearson’s criticisms of the PBO costing didn’t make sense.

“You’ve got to operate the train lines, not just build it,” he said. “You don’t build a home and not live in it.”

The deputy Liberal leader reiterated calls for the government to pause the SRL and release the tunnelling contracts for public scrutiny.

The project’s east and north sections are set to run from Cheltenham to Box Hill, and then Box Hill to Melbourne Airport, respectively.

The ultimate plan of the 90-kilometre Suburban Rail Loop is to connect Cheltenham in Melbourne’s south to Werribee in the west.

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