Minister releases $2.2b for Suburban Rail Loop but flags ‘hurdles’ for more cash

The federal government has released $2.2 billion for Victoria’s controversial Suburban Rail Loop but flagged the state had more work to do on firming up the project’s financial underpinning if it wants more money from the Commonwealth.

Suburban Rail Loop Minister Harriet Shing welcomed the move after federal infrastructure minister Catherine King announced the release of the funds in a media interview on Wednesday afternoon.

A Suburban Rail Lop construction site in Clayton.Credit: Joe Armao

“Australia’s largest housing project, our Suburban Rail Loop, has just received $2.2 billion in good news from the Albanese government. This means more homes and more opportunities, closer to where people want to live,” Shing said.

“As the federal government again made clear today, this is a good project. This is an important project. We agree.”

The federal and Victorian governments have been at loggerheads over funding for the project, which has a $35 billion price tag for its first stage.

The state government is hoping to convince the federal government to contribute a further $9 billion and that it can raise another $12 billion from unspecified “value capture” property charges.

The proposed Suburban Rail Loop.Credit: Supplied

King told the ABC that the state would still have to overcome further “hurdles” before it would get wider support particularly around value capture.

“My department have now assessed that and recommended that the money be released to the Victorian government on the basis of very specific things that it will be going towards,” she said.

The project was important for Melbourne, especially given the city’s population growth, King said.

“But I also need to make sure that I’m getting value for money for Australian taxpayer dollars.

“What I’m saying to them is there’s some more work that will need to be done before further investment in Suburban Rail Loop.

“But there’s also other projects, of course, that we continue to talk to the Victorians about.”

The federal government would continue its discussions with the Victorian government about the rail project – particularly as it received Infrastructure Australia’s advice about value capture – before it invested further, King said.

As of September last year, the Allan government was yet to convince the Commonwealth that the flagship project was worth building, with its failure to submit a credible business case holding back the $2.2 billion promised ahead of the 2022 federal election.

Opposition major projects spokesman Evan Mulholland said the announcement showed the federal government’s funding was far from certain.

“Jacinta Allan tried to hold Canberra hostage for more than the $2.2 billion already promised and has now been shamed with the news they won’t be committing the full third of her SRL East project,” he said.

“It’s quite clear this project must now be paused, our credit rating agencies have warned of a ratings downgrade without additional federal funding.

“Every dollar spent on SRL East is a dollar not being spent in the growth areas and regions of Victoria that are being starved of infrastructure.”

Federal officials have resisted the Victorian premier’s demands for billions more in funding for the contentious rail loop.

The stand-off has delayed a broader deal that could free up funds for more immediate projects, such as an airport rail and upgrades to the Western Highway and other roads, which federal Labor MPs view as crucial in a tightening contest with Liberals.

Victorian Transport Infrastructure Minister Gabrielle Williams on Wednesday morning denied the state was trying to blackmail the federal government for Suburban Rail Loop funding.

“We are in constant conversation with the Commonwealth government … about Victoria getting its fair share, noting of course that we’ve been short-changed over many, many years, to the tune of $8 billion under the Morrison government,” Williams told reporters.

Highlighting the stand-off is the paucity of federal funds recently committed to Victoria.

The only recent project announced jointly by the federal and state governments was a $333 million road project linked to the Werribee byelection in January. In the same month, $7.2 billion of federal funding was allocated to Queensland and about $1.6 billion was given to NSW.

After Prime Minister Anthony Albanese pledged $2.2 billion for the Suburban Rail Loop East in the lead-up to the May 2022 federal election, the funds were included in its 2022-23 budget, with $400 million to be available this financial year, $1 billion in 2025-26 and $800 million in 2026-27.

That funding schedule was pushed back by a year in December 2023, with the first $400 million to be released from July 1, 2025. The Australian National Audit Office later said Victoria needed to submit a new business case to Infrastructure Australia for evaluation.

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