Premiers go to war over infrastructure cuts to road and rail pipeline

Infrastructure Minister Catherine King is at war with Labor premiers after she axed 50 projects from the commonwealth’s $120bn capital works pipeline.

Infrastructure Minister Catherine King will axe 50 projects from the commonwealth’s $120bn capital works pipeline, claiming changes were needed due to spiralling costs and runaway delays.

Infrastructure Minister Catherine King is at war with state Labor premiers after she axed 50 projects from the commonwealth’s $120bn capital works pipeline, with both NSW and Queensland denying the federal government’s claim there was national cabinet support for the cuts.

Unveiling the government’s response to an independent infrastructure review on Thursday, Ms King said tough decisions were needed to rein in runaway cost blowouts.

“The inescapable truth is that the previous government under the Liberals and Nationals failed to manage this incredibly important program during their decade,” Ms King said. “At best, the last decade is a case study of what governments should not do.”

Half of the 50 scrapped projects – including the Great Western Highway upgrade in NSW, Queensland’s Sunshine Coast rail link and Victoria’s Geelong Fast Rail – are in Liberal/Nationals-held seats, while just nine Labor-held electorates will have funding reduced for road and rail projects.

NSW Treasurer Daniel Mookhey said the commonwealth’s decision had blown $1.4bn in the state’s budget.

“It’s clear that NSW and its government has been talking to the commonwealth but they haven’t been listening,” he said.
Mr Mookhey said the infrastructure cuts were despite NSW doing the most to “back in the commonwealth’s population policy”.

“We expect them to help us get the houses built, the roads built and the public transport built that communities expect,” he said.

Queensland accused the Albanese government of dishonesty after Ms King originally claimed to have the backing of the states to carry out the new plan, while experts blasted the federal government over a lack of transparency for refusing to outline the basis for cutting projects.

The Tasmanian government said the commonwealth’s push to implement a 50/50 funding model would seriously undermine vital infrastructure improvements, and Deputy Premier Michael Ferguson warned it was “unacceptable for our regional communities”.

Western Australian Premier Roger Cook said he was “obviously disappointed federal Labor has had to recalibrate its infrastructure funding program”, warning the state would feel “an element of pain associated with that”.

But Victorian Premier Jacinta Allan was more understanding about the cuts in infrastructure funding to her state.

The cuts come after an independent review found nearly $33bn worth of cost blowouts and delays and another $14.2bn of expected financial pressures on projects not yet under construction.

Ms King on Thursday provided details on which projects would be axed when they did not “demonstrate merit, lack any national strategic rationale and do not meet the Australian government’s national investment priorities”.

Government sources said the total value of scrapped projects was $7bn, far below the blowout figure identified in the review.

NSW suffered the worst cuts, with 17 projects scrapped, including commuter carparks, road projects and rail proposals.

Victoria will have a dozen projects axed including Geelong Fast Rail, a freeway upgrade in the Mornington Peninsula and works on the Western Freeway and Goulburn Valley Highway.

In Queensland, Labor has pulled funding from nine projects including the Brisbane-to-Sunshine Coast rail link, highway upgrades and funding for the Emu Swamp dam.

South Australia will see five projects chopped while just one will be scrapped in Tasmania.

The government’s decision to cull 50 projects fell short of the 82 the review recommended not proceed, and it was silent on the status of a further 92 projects the expert panel said required more planning.

Over the next 10 years the government expects more than 400 “nation-building” projects will be completed or substantially developed including the North South Corridor from Torrens to Darlington, Gold Coast Faster Rail, the M1 Pacific Motorway Extension, METRONET, Tanami Road in Central Australia and the New Bridgewater Bridge.

Grattan Institute transport and cities program director Marion Terrill said Ms King’s decision to axe 50 projects without a clear rationale was at odds with the expert review’s recommendations for a more rigorous and transparent approach to managing capital works programs.

“It is a step forward, but very late and very modest,” Ms Terrill said. “A year and a half into this term of government, and we are still in a position where the commonwealth is putting large licks of money into projects on a basis that is still quite unclear to us.

“The infrastructure pipeline was overstuffed and it was really important the new government did a stocktake of projects and weed out the ones … not worth proceeding with. That is a good process, even if it is rather late.”

Ms Terrill said this week’s announcement the commonwealth would lower its funding share with the states on “nationally significant” projects from 80/20 to 50/50 would also have an impact.

Queensland Premier Annastacia Palaszczuk blasted “outrageous” cuts to state road and rail projects, saying it was “dishonest” to suggest the state government had co-operated.

“The funding cuts announced by the federal government to Queensland infrastructure projects are outrageous,” she said.

“I want to make it very clear again for Minister King that this infrastructure review does not have our co-operation.”

The government also faced backlash during question time from independent MPs Rebekha Sharkie and Helen Haines after Labor cut projects in their regional electorates.

Ms King on Thursday accused the former government of “economic vandalism” in managing the capital works program, saying the Coalition “deliberately set about announcing projects that did not have enough funding and they knew could not be delivered”.

The number of infrastructure projects rose from 115 to over 800 under the former government.

Ms King said an extra $7bn in funding would be given to the states to help pay for cost blowouts. She repeated there would be zero cuts to funding following the review, which she said was “not a savings exercise”.

However, Ms King was unable to confirm whether the $120bn size of the pipeline had increased, with the government expected to provide updated figures as part of its mid-year economic and fiscal outlook in December.

“At the start of the review I said we would not cut funding from the $120bn pipeline. It was not a savings exercise and we have honoured that. All states and territories have maintained their funding. Not a single dollar less over the next 10 years,” Ms King said.

The failure to cut funding comes despite warnings from the International Monetary Fund and Reserve Bank of Australia that governments must reduce spending on capital works in order to reduce pressure on inflation.

The International Monetary Fund, in a report this month, warned that the states’ huge infrastructure spending programs were driving costs higher and making it harder for the RBA to tame “high, persistent inflation”.

The IMF said deferring or culling projects would help ease cost pressures and help governments get better value for money.

Opposition infrastructure spokeswoman Bridget McKenzie accused Ms King of taking a “very political approach to the infrastructure review”.

Additional reporting: Lydia Lynch, Matthew Denholm, Rachel Baxendale, Paul Garvey