Allan must bin Andrews’ most expensive folly: the Suburban Rail Loop

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The first big decision Jacinta Allan should make as premier of Victoria is to abandon Daniel Andrews’ pet project, the multibillion-dollar Suburban Rail Loop.

The rail loop was always a folly. As Andrews leaves office, it is the most expensive folly in Australia. The Parliamentary Budget Office estimates the 90-kilometre rail line will cost $200 billion, four times the government’s cost estimate.

You might assume that the Victorian government would think carefully before promising to pile a generation’s worth of infrastructure investment into one project, but you would be wrong.

Infrastructure Victoria did not recommend the Suburban Rail Loop, nor was it consulted on the project before the government’s announcement. The Department of Transport was not consulted. Neither was Infrastructure Australia, nor state cabinet. Rather, the project was dreamed up in secret, and prematurely announced just three months before the 2018 election.

This is emblematic of Andrews’ Big Build mentality of doing big things in a hurry. Political considerations have consistently outweighed public benefit. A change in leadership is an opportunity to change tack and focus on a cohesive transport strategy for the benefit of Victorians.

The first problem with doing big things in a hurry is that the projects are riddled with risk. Premature announcements and a high price tag are two warning signs that a project is likely to have a cost-blowout: the Suburban Rail Loop has both.

Grattan Institute research shows that bigger projects are riskier projects. Almost half of projects with projected costs of more than $1 billion have a cost overrun, and the average increase in costs is 30 per cent.

Projects that are announced prematurely are also more likely to have a cost blowout. Major projects are complex. Cost estimates change as the project evolves through first announcement, strategic business case, to planning application, procurement, and during construction.

You don’t have to look far in Andrews’ Victoria for examples of megaprojects with cost blowouts.

The West Gate Tunnel project’s expected cost has blown out from an initial estimate of $5.5 billion to more than $10 billion. It is also several years behind schedule, partly because of a dispute over who is responsible for additional costs from contaminated soil on the site. And the expected cost of the North East Link has ballooned from $10 billion in 2016 to more than $16 billion today.

Premier Jacinta Allan. Credit: Eddie Jim

The second problem with big projects in a hurry is that if megaprojects are consistently under-costed, the government is likely to systematically over-invest in these projects.

This not only distorts investment decisions, it misleads the public. We are led to believe that a particular project is available to us for less than it really is.

Yet governments almost never go back and discover how the actual costs and benefits of a completed project compare with the costs and benefits that were promised. If they do go back, they rarely share their findings with taxpayers. It’s impossible to know how much cost blowouts from megaprojects have cost Victorian taxpayers under the Andrews government because that information is not disclosed transparently to the community.

The third problem with doing big things in a hurry is that they don’t form part of any cohesive plan for Victoria’s transport system. Despite legislated requirements, Victoria has lacked a coherent, overarching transport strategy for years. In 2021, a Victorian auditor-general’s report stated that the government was not complying with its legislated responsibility to have an integrated transport plan. Rather, the auditor-general said, Victoria had a scattering of plans – and many of these were incomplete or not available to the public. Infrastructure Victoria has also recommended the government publish an integrated transport plan as soon as possible.

Some would argue that without taking some gambles, we wouldn’t have ended up with transformative projects such as Sydney’s Opera House and Harbour Bridge. But there are an infinite number of potentially transformative projects.

Without projects being carefully scrutinised, it’s difficult to know what the objectives are, if there are better ways of achieving those objectives, and if we are overlooking better projects in their favour. Think about what we could do with the $50 billion to $200 billion the Suburban Rail Loop is expected to cost. For that kind of money, we could see huge improvements in train timetabling and high-capacity signalling, better bus services, lower public transport fares, safer and smoother roads, and much more.

A good place for Premier Jacinta Allan to start would be one of the 94 recommendations in Infrastructure Victoria’s 30-year transport strategy, most of which have been ignored by the Andrews government in favour of projects that have never been recommended or assessed.

Skyrocketing construction prices and a mammoth debt problem in Victoria have led to some sensible decisions in recent months. The Andrews government canned the Commonwealth Games, and delayed major projects, including the popular Airport Rail. The federal government is trying to give some more teeth to Infrastructure Australia, and has conducted a review of its pipeline of major projects. These are good steps towards an infrastructure strategy that is focused on projects that bring the most value to Victorians, not provide the best ribbon-cutting ceremonies.

This is the path our new premier should follow. Pausing, planning, and focusing on providing the infrastructure that will benefit Victorians most. It will enable her to leave a legacy not of big, rushed projects, but of a liveable, connected, sustainable Victoria. The first step is binning the Suburban Rail Loop.

Natasha Bradshaw is a researcher in Grattan Institute’s Transport and Cities Program.

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