‘Cost, benefits unclear’: watchdog slams Victoria’s Suburban Rail Loop

Australia’s independent infrastructure body has flagged serious concerns over Victoria’s Suburban Rail Loop project, warning it must prepare an ‘exit’ strategy if it can’t be delivered.

Victorian Premier Jacinta Allan, centre. Ms Allan is shown in 2020, when she was Minister for Transport Infrastructure and Minister for the Suburban Rail Loop, at the Arden Station construction site on North Melbourne. Picture: NCA NewsWire / Penny Stephens

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Australia’s independent infrastructure watchdog has flagged serious concerns about the cost and benefits of the Victoria’s Suburban Rail Loop project, warning it has “low confidence” the first stage can be delivered within its $35b budget.

Infrastructure Australia’s report on the Allan government's controversial signature rail project has delivered a devastating verdict on the business case which calls for Labor to start planning an “exit” strategy in case the project is axed.

“The costs and benefits of the whole SRL Program, including SRL Airport and SRL West, are undefined,” the report states.

In a ten-page business case evaluation report published on Friday, Infrastructure Australia also raises concerns about the Allan government’s plans to use value-capture to fund a third of the first stage that will link Cheltenham to Box Hill.

“Based on the information provided, we have low confidence in the cost estimate for SRL East (first stage), presenting a major risk to the SRL East project, and the SRL Program as a whole,” the report states.

Whilst acknowledging the project has strong potential to “reshape the urban form” and increase jobs and boost transport connectivity, the report goes on to say the project’s cost estimates are out of date.

“The proponent’s (Victorian government) cost estimate was produced in 2020 and therefore does not reflect the design and scope definition activities that the proponent has undertaken over the last five years,” the report states.

“Industry-wide cost escalation since 2020 presents further risk and uncertainty. Due to the uncertainty in the cost estimate, it is likely the economic case for SRL East and SRL North is overstated as any further increases to costs without extra benefits will reduce the benefit-cost ratio.”

The Allan Government has been under massive pressure to cancel the project, which could cost $125b, as state debt spirals and the budget plunges into the red.

The Infrastructure Australia case will heap more pressure on Premier Jacinta Allan who has stuck by the project during her 18 months in the top job.

One of the most damaging recommendations in the report is Infrastructure Australia’s call for the Allan government to start preparing a strategy in case the project is cancelled.

“We recommend the proponent develops the exit strategies discussed in the Business and Investment Case (BIC) in detail, in consultation with the Australian Government, to provide a clear pathway to successfully conclude or transition out of the project in the event it cannot be delivered at this stage or in the future,” the report recommends.

The Albanese Government has committed $2b to the project

Ombudsman’s report highlights ‘obvious risks to public funds’ from Suburban Rail Loop secrecy

but the Infrastructure Australia report warns that before it commits any more money it needs

The Infrastructure Australia report recommends that before the government commits any more taxpayer funds to the project it must demand more information from the Allan government, including an “updated and detailed cost estimate”.

And a “comprehensive funding and financing strategy with supporting quantitative analysis that details how value capture will fund one third of SRL East’s cost”.

The report criticises the lack of information provided by the government.

“While some new additional information has been provided to support our evaluation of SRL East ... it does not provide disaggregated information to understand the specific benefits of SRL East, and its contribution to the overall SRL Program,” the report states.

The report also throws into doubt Ms Allan’s repeated claims that value capture — revenue raised by associated developments — would fund about $11b of the cost of the first stage.

“One third of the estimated cost of SRL East ($11.5b) is proposed to be funded through value-capture mechanisms,” the report states.

“While we acknowledge the role value capture can play in funding infrastructure, there is insufficient detail in the submission to provide confidence that these mechanisms can provide such a large proportion of the required funding, presenting a major risk to the project.”

Infrastructure Australia is an independent statutory body that provides independent research and advice to governments on projects.

Victorian SRL Minister Harriet Shing said the project remained on time and on budget.

“... Tunnel-boring machines are in the ground next year, and trains will be running between Cheltenham and Box Hill in 2035,” she said.

“Following a decade of neglect from the Federal Liberal National Government our partnership with the Albanese Labor Government has delivered $2.2 billion towards the SRL, backed in by Infrastructure Australia.

“Assessing SRL East in isolation would provide an incomplete picture of its economic impact, as infrastructure and housing projects deliver benefits over decades - the benefits will become even greater with the delivery of SRL North, Airport and West.

“SRL is Australia’s largest housing project and will deliver 70,000 more homes closer to where people grew up, while cutting travel times to jobs, healthcare, and Australia’s biggest universities.”

Opposition major projects spokesperson Evan Mulholland said the report was a “blistering critique of Labor’s most reckless vanity project”.

“It confirms what every expert and every Victorian already knows – SRL East is a massive risk to the state’s budget and the broader economy,” he said.

“Uncertainty around costs, unverified benefits, and unrealistic value capture projections make the Suburban Rail Loop completely unviable in its current form.

“It must be paused before more damage is done.”