Our way or the railway: Canberra rejects $11.5b suburban loop request

The Morrison government says Victorian Labor’s multibillion-dollar Suburban Rail Loop does not “stack up”, raising questions about the state government’s ability to pay for the project if forced to go it alone.

Urban Infrastructure Minister Paul Fletcher also hit back at attacks from the state government, which has criticised the Commonwealth for only allocating 6 per cent of the budget’s infrastructure funding to Victoria, which is home to 26 per cent of the nation’s population.

Infrastructure Minister Paul Fletcher.Credit: Dominic Lorimer

“We don’t work on the basis of total national funding being divided by population and writing a cheque,” Mr Fletcher said on Thursday. “We exercise independent policy judgment on where we think investment is required.”

The Age can reveal the Andrews government sought new federal infrastructure funding for only two projects, an upgrade to Mickleham Road in Melbourne’s north, to which the Commonwealth agreed to contribute $109.5 million, and $11.5 billion over 10 years for the Suburban Rail Loop – a mostly underground railway running from Cheltenham to Werribee via Melbourne Airport.

The latter request was rejected and Mr Fletcher said the federal government did not believe the costs for what is Australia’s biggest infrastructure project were matched by its benefits, representing the strongest opposition to the project expressed by the Commonwealth to date.

“We’re yet to see evidence this project makes sense,” Mr Fletcher said.

An artist’s impression of a driverless train running on the proposed Suburban Rail Loop. 

“It’s massively expensive – it’s likely the overall cost of [the first sections alone] will be between $48-$67.4 billion – and we don’t think the benefit has been made out to justify that cost. We don’t think the project stacks up.

“Essentially, if we had proceeded with the funding sought, it would have wiped out every other commitment we have made [in Victoria], just the scale of it.”

The project was unveiled three months before the November 2018 state election, when Premier Daniel Andrews claimed it would cost about $50 billion and be built by 2050.

Responding to the federal government’s rejection, Victorian Transport Infrastructure Minister Jacinta Allan said Victorians were “sick of being ignored on projects they voted for by a Liberal government who can’t even build a car park”.

“This has nothing to do with the projects Victorians voted for, and everything to do with politics and an imminent federal election. Victorians endorsed [the rail loop project] at the ballot box and the business case shows it stacks up,” she said.

“With less than 6 per cent of new infrastructure funding for Victoria, supporting the Suburban Rail Loop – a small fraction of the Morrison government’s infrastructure spend – would go some way to giving Victoria our fair share.”

Mr Fletcher said government spending figures were “lumpy” because the timing of investments meant some states had more projects in the next few years while others were earmarked for further into the future.

He said the Morrison government prioritised Victorian projects that made the national economy more productive and highlighted the $3.6 billion in the budget injected into freight terminals that would make the movement of goods around the nation more efficient.

A Grattan Institute report published last week stated: “Queensland and NSW, where federal elections tend to be won and lost, consistently receive more, and Victoria less than can be explained by population, population growth, size of the road network, share of passenger or freight travel, or what it actually costs the state government to run the transport system”.

Victorian Premier Daniel Andrews and Transport Infrastructure Minister Jacinta Allan announce the Suburban Rail Loop in 2018. Credit: Joe Armao

In a pre-budget letter to Deputy Prime Minister and Infrastructure Minister Barnaby Joyce, Ms Allan said the Victorians were “seeking to partner with the Commonwealth” on the rail loop.

“Again, I commend this project to you for funding consideration given the significant economic and productivity benefits [it] will deliver for the nation,” the letter said.

Mr Fletcher did not rule out funding the rail loop if new information emerged about its benefits. However, his strong commentary about the project’s merits creates the possibility that it may never get funding from a federal Coalition government.

Canberra’s rejection comes amid the backdrop of a worsening budget position for Victoria, which is expected to hold $155 billion in debt in coming years.

The feud over the rail loop also raises the stakes in the federal election. Two federal Labor sources, speaking anonymously because plans are not finalised, said it was highly likely the party would announce a spending pledge for the project before the election due in May. Federal Labor committed $10 billion to the loop before the 2019 election.

An Age investigation last August detailed the secretive and questionable conception of the rail loop, which was led by consultants at PwC and shut out most of the state’s cabinet and the then head of the Transport Department.

A 400-page investment case released last year showed just two sections of the line in the east and north-east could cost $50 billion and would not be completed until 2053.

Some transport experts believe the project will cost closer to $100 billion.

Separately, the state government has attacked the federal government for excluding any Victorian projects from a $7.1 billion Energy Security and Regional Development fund controlled by the Nationals and established to secure Nationals support for Prime Minister Scott Morrison’s net zero emissions promise.

Former infrastructure minister Darren Chester, also the National Party MP for Gippsland, said he understood the fund’s focus on undeveloped parts of regional Australia with “huge potential” but he would argue after the election for a large funding package for the Latrobe Valley, whose economy is transitioning away from brown coal.

He said the Victorian government was partly to blame for the relative lack of federal investment for the state.

“They are a large part of the problem because they have a nasty habit of announcing infrastructure projects at press conferences and demanding the Commonwealth pick up half the bill,” he said.

Jacqueline Maley cuts through the noise of the federal election campaign with news, views and expert analysis. Sign up to our Australia Votes 2022 newsletter here.