The Victorian government has “overstated” the benefits of sections of its contentious Suburban Rail Loop project, Australia’s peak infrastructure body has determined, as it warns blowouts to the $34.5bn price tag of the first section are likely.
In its evaluation of the Suburban Rail Loop (SRL) East section, Infrastructure Australia – the commonwealth-funded independent infrastructure adviser – has recommended the federal government halt further funding to the project until an updated estimate and cost-benefit analysis is produced.
Even if an updated business case stacks up, the body has urged governments to prepare an “exit strategy” should delivery prove unfeasible.
The report was publicly released on Friday, but is understood to have been delivered to the Albanese government before it committed $2.2bn to the project in February.
The SRL project, a vision for an orbital rail track from Cheltenham to Werribee that connects to Melbourne’s existing rail network, has been mired in controversy over its high cost and completion date.
The first stage of the project, SRL East – 26km of twin underground tunnels from Cheltenham to Box Hill – is expected to be completed by 2035.
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Infrastructure Australia’s evaluation of SRL East appears to back several of the cost blowout concerns, and was scathing of the rigour of the submitted business case.
“The economic appraisal … considers the SRL East and SRL North components of the SRL Program, and based on our analysis, we consider the results to be overstated. The analysis is not sufficiently detailed to allow us to understand the economic impacts of SRL East,” it said.
Costs blowouts to the $34.5bn price tag for SRL East are likely, Infrastructure Australia found, due to initial estimates being made in 2020, before industry-wide cost escalations increased the price of most construction projects.
“Based on the information provided, we have low confidence in the cost estimate for SRL East, presenting a major risk to the SRL East project, and the SRL Program as a whole,” it said.
The Victorian government plans to fund one-third of the project’s total cost, with the federal government also funding one-third of the total. The Victorian government is planning for the remaining third to be generated by value capture – a tax on the future sale of land and homes in the vicinity of stations where the value has soared due to the new infrastructure.
For the federal government to continue funding the SRL project, the evaluation recommends an updated cost benefit analysis as well as more detail on how value capture will be used to source funding.
Infrastructure Australia has called for an “exit strategy” to be developed even if federal funding continues, “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”.
