Melbourne Airport Rail makes the cut in federal funding review

Melbourne Airport Rail has survived a federal review of infrastructure projects, with the Commonwealth deciding to push on with the long-awaited train line even as a feud erupts with the Allan government over who is to blame for delays.

But one in 10 projects promised across the country face the axe to make financial space for major road, rail and bridge works that have blown out in cost by $33 billion.

An artist’s impression of a proposed elevated rail station at Melbourne Airport.

Federal Infrastructure Minister Catherine King will on Thursday release the Albanese government’s review of the national infrastructure pipeline, with select findings provided to The Age calling for an overhaul of the Commonwealth’s funding priorities.

While the review does not contain findings about the Suburban Rail Loop, it does have recommendations that require it be proven to have national significance, and force Victoria to provide annual updates on its project spending.

Three state and federal sources, speaking on the condition of anonymity to discuss government deliberations, said the Albanese government had not agreed to delay Melbourne Airport Rail by four years as requested by the Allan government.

The decision to push ahead with Airport Rail puts the Allan government’s funding for the Suburban Rail Loop in a delicate position.

The rail link relies on $5 billion in federal funding that the state could have pushed towards the Suburban Rail Loop.

At the same time the Airport Rail project requires Victoria to find $5 billion to match the federal contribution.

State and federal MPs in Melbourne’s north and west, who campaigned heavily on the benefits of the airport link, were blindsided in May when it was revealed the Allan government had asked Canberra to consider stalling the project.

Early works had already begun on Melbourne Airport Rail but were halted as Victoria awaited further federal advice. After months of speculation, one senior federal government source said the review would back the rail link project starting within the next few years.

A senior state government source said King had “held firm” in backing the project.

A feud has emerged between both levels of government over the handling of a dispute with the owners of Melbourne Airport, who do not support Victoria and the Commonwealth’s plan to put the station at Tullamarine above ground. The airport planned for an underground station and wants compensation if this does not happen.

Another senior state government source, speaking anonymously to discuss negotiations, pushed back on claims that the Allan government caused the project’s delay.

They described the federal government’s response on Airport Rail from the outset as weak – and that any suggestion they are responsible for a delay was wrong.

“Any calls for delay are the result of the federal government’s refusal to use their position and their powers to get this done,” they said.

A Victorian government spokesman said the state had been negotiating with Melbourne Airport for more than three years over, but that “negotiations have collapsed because of the airport’s unreasonable requests”.

Melbourne Airport’s owners have said they would negotiate in good faith with governments over the rail line design.

Both Victoria and the Commonwealth have contributed $5 billion to the project. However, it has a price range of up to $13 billion and neither government agreed to contribute more money before the review was called.

The review recommends 100 projects not yet under construction go ahead. Another 56 will be given the green light if they can address risks of overruns identified by the review.

Another 36 promised projects should be better planned and “re-scoped”, with savings pumped into other works, while 82 should be cancelled.

Upgrades to the Western Highway corridor in regional Victoria will receive an extra $100 million from the Commonwealth.

The review found many of the cost blowouts were due to the “ad hoc” way in which the government dealt with projects, noting it was not responsive to “evidence of looming cost increases or aligned with long-term plans and strategies, and lack transparency and consistency”.

Projects for the coming financial year are already more than $1 billion over budget. By 2027-28, when $9 billion has been allocated for infrastructure projects, the review estimates the true cost will top $18 billion.

Apart from major infrastructure, the review said the government should increase funding to local councils under the roads-to-recovery program, which pumps cash into regional areas and for the black spot program.

Premier Jacinta Allan on Wednesday said the federal government set parameters for the review and Victoria was working within them.

“We’ve been negotiating for the best part of three or so years with the airport on how to progress that project,” Allan said.

“There were a number of issues that we were working on with the airport, that we were endeavouring to negotiate with the airport. That was not the only issue under consideration.”

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