Western Sydney Airport ‘needs private backer’: Graham Bradley

Former BCA president Graham Bradley is surprised the government has decided to build the Western Sydney Airport.

Greenfield developments carry risk in the initial years. Picture: Jenny Evans

One of Australia’s most influential business figures has added to pressure on the Turnbull government to bring in private sector backing for the second Sydney airport and declared a massive investment in associated infrastructure would be needed to make the project a ­success.

Former Business Council of Australia president Graham Bradley said he was surprised the government had decided it would build the Western Sydney Airport itself and believed it was important to “thoroughly test the private investment market for what is essentially commercial infrastructure”.

“This would be a significant federal government project that would require significant additional expenditures in addition to the cost of the airport itself, all of which should be taken into ­account,” he told The Australian.

He said there also needed to be a “very explicit understanding of the operating losses that the project would incur in its early years”.

Mr Bradley said the cost of the airport was “only a fraction of the total cost of the infrastructure you need for a project of this size to be successful”.

He also noted the risks inherent in greenfield developments where there was patronage risk in the initial years.

“What we often see with business cases around major infrastructure is that governments forget about the ancillary costs that they will incur to make them workable and the operating losses that they will incur in their first five, 10 or 20 years even in the case of a major project like an airport.”

Infrastructure Australia has ­estimated that the 2018-26 cost of building the first stage of the airport will be about $5 billion, which would deliver a 3700m runway with a parallel taxiway, associated terminal infrastructure and support precincts. That stage could cater for 10 million passengers a year.

Further works to expand the airport in the longer term would cost more than $38bn.

But the business case put to ­Infrastructure Australia by the Department of Infrastructure and Regional Development expected that all supporting infrastructure — including road and rail links between Badgerys Creek and Sydney’s ground transport system — would be provided by the NSW government in consultation with the federal government.

Mr Bradley’s comments come after the government on Tuesday decided it would develop Badgerys Creek itself after Sydney Airport said it could not make the project stack up.

Sydney Airport exercised its first right of refusal to build the airport, which was part of the terms of the 2002 privatisation of Kingsford Smith.

The government is expected to outline further detail on Tuesday, when it delivers the federal budget.

But already business leaders have lined up to urge the government to involve the private sector by looking at innovative financing model such as those used to build Sydney’s WestConnex motorway, in which the NSW government is taking development risk then selling off stages of a project before recycling funds into the next stage.

Infrastructure Partnerships Australia chief executive Brendan Lyon said Western Sydney Airport “brings some big and unusual challenges for commonwealth taxpayers, given the complex delivery and operational risks”.

“We don’t yet have a clear picture of where or how much demand there will be for the airport in the early years,’’ Mr Lyon said.

“For example, will customers be travelling from the CBD to Badgerys Creek, or from the ­western suburbs and beyond — and how many of them will there be?”

Canberra has already pledged a series of road works that would service the airport as part of its $3.6bn plan for infrastructure in western Sydney.

But a new rail link is considered necessary to connect the site in western Sydney to other suburbs, and it is expected the NSW government would help fund it.

A joint scoping study paper released last year by the federal and NSW governments canvassed several options, including a super-fast train that could travel at 160km/h from the Western Sydney Airport to Parramatta in 15 ­minutes and then get to the ­Sydney CBD in a further 12 minutes.

But the most expensive of the options could cost up to $25bn. The joint scoping study, which is expected to look at how the rail should be funded, will report to the two governments by mid-year.

Opposition Leader Bill Shorten has said that Labor would pour in $400 million of funds to building a western Sydney rail line that would connect Sydney to the new airport and be would ready in time for the 2026 opening of the rail line.

Malcolm Turnbull has previously said he considered it would be preferable to have the rail link ready by the time the airport opened.

But Mr Lyon questioned the emphasis on the timing of a rail link to the new airport in the debate around the project.

“The focus on rail connections being needed on day one is an understandable focus for the tourism industry, but we don’t yet understand where the users of the airport will come from or what they need, beyond the almost $4bn in already funded roads to Badgerys Creek,” Mr Lyon said.

He said it was “far too early to commit to rail connections that will cost at least as much as the forecast cost of the airport itself and we need to answer these questions and be confident in those ­answers before committing billions to rail”.