Second Sydney airport to be built out west

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ScreenHunter_2062 Apr. 15 14.18

By Leith van Onselen

Prime Minister Tony Abbott has today announced that Badgerys Creek in Sydney’s west will be home to the city’s second airport, with work on the $2.5 billion project expected to commence in 2016 and reaching full operating capacity within a decade. From The AFR:

The federal government will bear some costs with planning but is expected to announce later this week a large investment of its own in roads and other transport infrastructure to service the new airport…

Mr Abbott assured the roads would be built before the airport…

Mr Abbott said “for more than 50 years governments have talked about a second airport for Sydney”.

“The talk is over. The final decision has been made.”

The government said the initial construction phase is expected to generate around 4,000 jobs..

The land required for the airport to be built was bought by the Hawke government in 1986, with the site first identified as suitable in the 1960s.

The airport is not yet a done deal, however, with Sydney Airport Corporation – the owners of the existing airport at Mascot – having the first right of refusal on building the new airport at Badgerys Creek. The Government has reportedly insisted that a decision be made by Sydney Airport Corporation within 12 months.

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The decision to build a second airport in Sydney seems sensible in light of the city’s size and growing demands on air travel. Most medium-to-large cities around the world – be it Melbourne or the San Francisco Bay Area – have two airports, so it would appear strange if Sydney does not eventually follow suit.

That said, it does seem strange that Sydney Airport Corporation is allowed to block the deal and effectively hold the state to ransom. This is seemingly another example of a botched privatisation of a natural monopoly.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.