This site has gone to great effort exposing the lunacy of the ACT Light Rail Project.
Now, secret NSW Government documents have revealed that the Parramatta Light Rail Project – the centrepiece of the Government’s plans to cement Parramatta as Sydney’s second central business district, as well as facilitate the building thousands of apartments around Sydney Olympic Park – has experienced a massive cost blowout and the benefits are unlikely to meet the costs. From The SMH:
[The cost] has ballooned to more than $3.5 billion – $2.5 billion above what has been budgeted…
If a project’s benefit cost ratio is less than one, a project is expected to deliver less benefit than cost.
A business case dated May 2015 shows a maximum benefit cost ratio for light rail lines around Parramatta of 0.73.
An addendum dated July 2015 reports range benefit cost ratios from 0.66 if only transport benefits are included, potentially rising to 1.06 if “wider economic benefits” are included…
The line is expected to run services every 10 minutes during the day, and carry around 10,000 passengers in a morning peak hour by 2036.
With the Australian Government running a high immigration program, and Sydney’s population projected to continue ballooning for decades to come (see next chart), the state government will need to invest heavily in infrastructure or risk crippling congestion, as well as lower urban amenity and living standards.
The problem is that this project is not expected to provide net benefits for residents, and instead represents a subsidy to high-rise property developers located along the line.
The other problem is that large cities like Sydney and Melbourne have reached such a size that they are exhibiting diseconomies of scale, which occurs when the cost of providing an extra unit of infrastructure increases as the city grows.
Basically, because Sydney and Melbourne are already built-up, there is little room to retro-fit new infrastructure without expensive additions like land buy-backs, tunnelling, or hideous disruptions to existing infrastructure.
We have seen these diseconomies of scale time and time again. For example, projects like Melbourne’s now defunct East West Road Link was expected to cost 18 billion, whereas Sydney’s North West Rail Link would cost $8 billion. That’s an astounding $350 million to $1 billion per kilometre.
Hence, running a population ponzi economy becomes increasingly costly for existing residents. The huge infrastructure costs also forces unpopular asset sales, increased debt borrowings and austerity.
The obvious solution is to significantly dial back immigration and forestall the need for the costly new infrastructure projects in the first place.
