Labor-led committee backs calls for new costing of Suburban Rail Loop

Victoria is under renewed pressure to recost the first stage of the Suburban Rail Loop after a Labor-led committee called on the government to publish new analysis and details of the taxes it plans to use to fund a third of the project.

On Tuesday, Victoria’s parliamentary accounts and estimates committee released its report into the 2025-26 budget, informed by weeks of public hearings in which ministers and department heads were quizzed about their funding priorities.

Suburban Rail Loop construction in Clayton.Credit: Justin McManus

The nine-person committee, which includes five Labor MPs, recommended that the Victorian government publish an updated cost-benefit analysis of the $34.5 billion Suburban Rail Loop East.

This would include fresh analysis of the total cost of the project and an underground rail line from Cheltenham to Box Hill, and whether it would still generate a positive return on investment.

Another recommendation called on the government to publicly provide details of its value capture strategy, in which it intends to raise $11.5 billion in fees and taxes collected on the increase in property values generated by SRL East.

The rail loop’s 2021 business case initially proposed three options for value capture – a charge on new developments, an increase on commercial stamp duty up to 1 per cent and a congestion levy paid by owners of commercial off-street paid car parks.

However, the government is yet to confirm what taxes and charges it will use, despite some of these options being proposed for a 2025 start date.

The Age revealed in March that the government was also considering siphoning off a share of tax revenue from properties near proposed rail loop stations.

Both recommendations were partly driven by a project assessment earlier this year by Infrastructure Australia, which called on the Commonwealth not to commit further federal funding to SRL East, beyond its $2.2 billion contribution, until the project was costed again and further details provided about value capture.

The committee asked that the Allan government to publish an update on its response to Infrastructure Australia’s recommendations.

They also noted that the significant size of SRL East and its long construction time frame meant there were many risks to its delivery.

Last year, Suburban Rail Loop Minister Danny Pearson insisted the $34.5 billion price tag would be maintained despite a 22 per cent increase in construction costs since the business case was released in 2021.

Harriet Shing, the new minister for the rail loop, repeated this assertion to the committee in 2025 and said this was because of the decision to split the project into multiple work packages and improvements in contract negotiations.

The Allan government has been contacted for comment. The government is typically required to respond to a committee report within six months of its release.

Committee chair Sarah Connolly said the recommendations were designed to ensure every taxpayer dollar was spent delivering measurable benefits for Victorians.

“Transparency and accountability are essential to maintaining public trust and achieving better outcomes,” she said.

Opposition major projects spokesman Matthew Guy said the government should be upfront with the “true financials” of SRL East.

“If there is nothing to fear, there is nothing to hide,” he said.

The Allan government says assessing SRL East on its own would not give a full picture of its benefits over decades, which would be boosted by other stages.

“Victorians have endorsed the SRL at multiple state and federal elections and we will continue to work with our project partner, the Albanese government to get on building this priority project - with the Commonwealth already investing $2.2 billion,” a spokesperson said.

Another key recommendation from the estimates report is that the Department of Treasury and Finance update its guidelines for annual reports so that government departments are required to report on savings.

Treasurer Jaclyn Symes pledged to find $3.3 billion in savings over the next four years in her next budget, equivalent to about 1200 jobs.

She has also received a review of the public sector by Baillieu-era public service chief Helen Silver, who was tasked with finding cost savings across the government including merging Victoria’s many public agencies.

A response to that review is expected to be released by the government within coming weeks.

The 2025-26 budget includes $9.7 billion in contingency funds that are not allocated to any specific department.

This figure has reduced as a proportion of total spending since peaking in 2021-22, but still makes up a greater share of the budget than before the pandemic.

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