East-West Link tunnel of pork exposed

By Leith van Onselen

As expected, the release of the East-West Link business case by the new Victorian Government has revealed the project never stacked-up, producing a negative return to taxpayers once dubious “wider economic benefits” were excluded. From The AFR:

[New Treasurer, Tim Pallas] said the East West Link business case showed deception and “public malfeasance and fraud of a massive scale”. But he was unable to point to a specific lie by the former ­Napthine coalition government. The original business case for the East West Link showed a return of just 45¢ on the dollar and sent the Napthine government back to the drawing board.

It ­produced a revised business case in June 2013, that showed a return of 80¢ in the dollar – or $1.40 including “wider economic benefits”…

The updated business case included the benefits of other projects, such as widening the ­Tullamarine and Eastern Freeways and boosting public transport.

Talk about one giant example of malinvestment, which would rank alongside Victoria’s hideously expensive desalination plant and its Myki public transport ticketing project.

I have argued consistently that well targeted infrastructure investment can offer the double dividend of supporting growth and jobs as the mining investment boom fades, whilst also expanding Australia’s longer-term productive base and improving living standards.

However, in order to be successful, such infrastructure investment must pass rigorous and transparent cost-benefit analysis, to ensure that it delivers the biggest returns to society. Otherwise, taxpayers will be left carrying the burden of expensive white elephants that offer only limited productivity/social value, and whose investment could have delivered much bigger returns elsewhere.

It is despicable that the former Liberal Government failed to follow due process on the East-West Link, and then hastily proceeded to sign the contracts on the project to beat the artificial November election deadline. Now unwary Victorian taxpayers will be left to pick up the tab, either through proceeding with the project or providing financial compensation to the consortium tasked with building the road/tunnel.

Let’s hope the new Labor Government can do better on infrastructure than its Labor and Liberal predecessors.

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Comments

  1. The other question that needs to be asked is why the Abbott government stumped $3 billion on an unviable project and a dubious business case. Better economic managers my ass.

    • C’mon Wing Nut, that’s too easy. The Libs dumped the money ahead of schedule into the Vic government coffers so Napthine could boast that the Vic budget was in surplus. A desperate and all too typically brazenly corrupt attempt to swing an election.

      • That money had been allocated by the Gillard government for other infrastructure projects in Victoria, including, if I’m not mistaken, the Metro Tunnel.

    • It probably benefits some Liberal party members/voters/donors. That is all the economic management needed, from their point of view.

  2. I agree wholeheartedly with the need for transparent and rigorous analysis of projects.

    However, that should only be the first step, and a useful one in developing policy.

    The next step, however, is essential.

    That step is resolving how to value those community benefits. If a benefit can be identified, but it is impossible to put a specific value on it, what should happen? If you ignore it, that is an implicit value of zero. Zero is a number, and even if we can’t value something exactly, assigning a value of zero when we know that the value is anything but zero is quite illogical. So, how do we do it?

    As a concrete example, Adelaide extended its tram system ten years ago, and had to decide how many new trams to buy. There is a phenomenon called the “sparks effect” where merely changing from diesel bus/train to electric, of itself increases patronage. Adelaide decided to set this value at zero.
    The result: they had to buy $36m worth of extra new trams, about a third of the fleet. There are trams available now for about half that cost, but you have to wait for the production lead time. Point being: Adelaide ignored one of the soft issues, and paid a hefty price.

  3. It is despicable that the former Liberal Government failed to follow due process on the East-West Link, and then hastily proceeded to sign the contracts on the project to beat the artificial November election deadline. Now unwary Victorian taxpayers will be left to pick up the tab, either through proceeding with the project or providing financial compensation to the consortium tasked with building the road/tunnel.

    Someone should be charged with fraud and malfeasance and locked in prison for stuff like this.

    • You would think so but we’d have to lock up everybody. The list of politicians who aren’t corrupt would be much easier to manage.

      If you have a think about state governments since federation it’s very hard to find one that wasn’t mired in one development scandal or another. All of them. Except maybe Don Dunstan although I suspect that was because he didn’t have enough time to get set up.

      • so the fact that they are all corrupt should be mitigating factor?

        With our AAA credit rating and low global IRs we can clearly afford a credit to build a large prison for politicians.

      • rob barrattMEMBER

        @docterX
        Sadly, this will be another waste of tax payers money. It appears the prosecution always makes some huge inexplicable cockup when politicians come to trial. Of course, I couldn’t possibly comment on any particular or recent instance..

    • I agree, along with the architects of Gonski and the NDIS, amongst others. I think we need a whole new party, called the Macro Business Party, as surely here are the brightest and most honest and unselfish people in the country.

    • The real failure of Myki is with the computer system at the back end. The cards are fine, it just takes too long to process many transactions. The contract is up for renewal next year and the back end will be replaced.

      The cost blow outs were mostly related to keeping the Metcard system going whilst Myki was not quite ready….. So it was really a Metcard cost.

      • @cornflakes

        Yes I am aware that due to delays of the Myki system, two years worth of Metcard maintenance cost were attributed to the Myki project. Also the support cost were extreme because Metcard was a licensed product and out of the support window.

    • All done in the ideological name of deleting unionised workers, eg station staff, tram conductors etc. Someone did some calcs and it would have been cheaper over the last 20 years to keep them all on and forget the fancy ticketing system failures.

  4. I won’t dispute that the desal was hideously expensive or poorly managed but I won’t brand it a complete failure for at least another decade or so either…(not saying you are either, JMHO)…

    • twas done after a mega drought, however was only built on the premise of doubling Melbourne’s population over the next couple of decades.

      • It may come to pass where the desal plant was one of the most brilliant building ideas of all time.

        time will tell though and maybe even this year/next year a drought will be here, already here where I live we have had only half the water/rain than we have had the last 2 years.