Three peak business groups have joined forces to condemn the ACT Liberal Party’s promise to tear up the contract for the $783 million ACT light-rail project if they win next year’s election, fearing such a move would lead to a replay of the East-West Link debacle in Victoria, whereby sovereign risk is increased and taxpayers are left footing the compensation bill. From The AFR:
…the Business Council of Australia, the Australian Industry Group and Infrastructure Partnerships Australia have written to ACT Opposition Leader Jeremy Hanson, asking him to not break the contract for the rail project…
The three groups said Australian governments had observed a long practice of respecting contracts entered into by their predecessors even when it proved “politically inconvenient”.
But the business groups warned of rising sovereign risk if the ACT project was canned which would only make infrastructure projects more expensive.
“While we respect your principled opposition to the Capital Metro project itself, we note that a valid contract will be in pace – and construction underway – well before next year’s election,” the letter said.
The ACT Light Rail Project has a lot in common with the scrapped East-West Link Project.
Like East-West Link, ACT Light Rail has been slammed by both Infrastructure Australia and the Productivity Commission (PC) as being an overly expensive substitute for a bus service. Here’s what the PC wrote about the project last year:
The ACT Government’s decision to proceed with a light rail project appears to be an example of where the results of cost–benefit analysis have been ignored without a valid explanation…
In a submission to Infrastructure Australia in 2012, the ACT Government analysed a number of options including bus rapid transit (BRT) and light rail rapid transit (LRT). The analysis estimated that the upfront capital costs for the BRT and LRT would be $276 million and $614 million respectively (on an undiscounted basis) (ACT Government 2012).
In its economic appraisal (which is essentially a cost–benefit analysis), the ACT Government found net present values of $243.3 million for BRT and $10.8 million for LRT. The benefit–cost ratio for BRT was estimated at 1.98, with 1.02 for LRT. In the assessment, the benefits of BRT and LRT were similar ($491.8 million against $534.9 million respectively), but the cost of BRT was less than half that of LRT ($248.5 million against $524.1 million, when discounted by 7 per cent). The cost–benefit analysis took into account a range of factors including journey times, and avoided environmental impacts and accidents (ACT Government 2012)…
In summary, a cost–benefit analysis showed BRT to be a greatly superior option than LRT…
And like the East-West Link, ACT Light Rail was approved for political reasons – namely because Labor lacked the numbers to form government and needed to gain support from the Greens sole MLA, Shane Rattenbury, who held the balance of power. It was effectively an $800 million bribe in order to gain office.
Finally, like the East-West Link, the ACT Government looks set to sign the contract prior to next year’s Territory election, rather than allowing voters to have their say on the Project.
Either way, the end result is likely to be a continuation of infrastructure malinvestment and waste, along with further poor outcomes for taxpayers.
