Allan says rail loop a ‘must have’, despite question mark over billions in funding

The Suburban Rail Loop’s business case canvassed ways to walk away from the project if it did not receive its expected funding, but Premier Jacinta Allan insists the line is a must-have despite uncertainty over billions in federal government cash.

Speaking for the first time since Infrastructure Australia released its evaluation of the first stage of the project, SRL East, Allan said on Sunday that SRL East could be delivered for under $34.5 billion despite the independent body saying it had low confidence in this figure.

Premier Jacinta AllanCredit: Luis Enrique Ascui

The Infrastructure Australia report released on Friday said no further federal funding should be committed to SRL East, beyond $2.2 billion pledged in the 2022 election, until it was re-costed, more details were provided about the charges that would be used to fund a third of its price tag, and it was clear whether the project stacked up financially on its own.

Infrastructure Australia also recommended the state further develop “exit strategies” flagged in its business and investment case to provide a clear pathway out of the project if it cannot be delivered.

The state government documents, produced in 2021, raised various potential responses if further investment could not be justified, including if there were issues with funding or approvals.

Victoria is expecting the Commonwealth to cover a third of the SRL East price tag, to cover a third by itself and to pay the final third through charges and fees on the improved value it will provide to the areas it affects, known as value capture.

“If the SRL East main works are not approved or funded as expected, any land assembled/acquired could be returned to government as an upgraded asset, re-purposed for alternative public uses, or considered for disposal,” the business case says.

Infrastructure Australia’s report questioned whether value capture could deliver $11 billion in revenue and prompted fears that any further federal funding would not be forthcoming. The agency had spent two years seeking further information from the state before its evaluation was completed.

Federal Housing Minister Clare O’Neil said on Saturday that the Commonwealth was taking the advice seriously.

“As for further funding, the minister’s made it really clear that that will be the subject of discussion and the Victorian government will need to come forward and explain some of what’s in that report,” O’Neil said.

Allan said her government would continue to provide information to the federal body. She said it was up to the federal government whether it could provide funding without recommendation from Infrastructure Australia, but said this had happened for other projects.

Workers at a Suburban Rail Loop construction site in Heatherton.Credit: Joe Armao

“We have $14 billion allocated to the Suburban Rail Loop project, which is more than enough to get away the contracts and have the project under way,” the premier said.

She said all three contracts awarded for SRL East, which is to connect Cheltenham and Box Hill, and significant cost increases in construction had been accounted for in its $34.5 billion price tag, with updates as contracts are awarded.

“It’s not a nice-to-have project; it’s a must-have project,” Allan said.

She also defended concerns from Infrastructure Australia that there was no benefit-to-cost comparison for SRL East by itself, with the business case only assessing the rail line as a combined project that included the unfunded second stage running from Box Hill to Melbourne Airport.

Allan would not say whether a separate analysis of SRL East would have a positive benefit-cost ratio.

“It is part of a staged project that has to be seen together.”

In its exit strategies chapter, the rail loop’s business case also says SRL East could operate as a standalone service. It does not say whether the project stacks up financially by itself.

Opposition transport infrastructure spokesman Evan Mulholland said no more federal funding seemed to be forthcoming.

“Almost the entire project is going to be banked on state government debt,” he said. “It’s not good enough, and we know it’s not going to cost between $30 and $34.5 billion.”

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