West Gate Tunnel: Another costly infrastructure waste


By Leith van Onselen

I have noted previously that one of the key reasons why Australia’s high population growth (immigration) is lowering the living standards of existing residents is because of the strain that it places on infrastructure, which inevitably leads to more congestion on roads, public transport, as well as more expensive housing.

Basic math (and commonsense) suggests that if you double the nation’s population, you need to at least double the stock of infrastructure to ensure that living standards are not eroded (other things equal).

And if you don’t build-out the infrastructure efficiently to match the population influx, then productivity and ergo living standards will be reduced, as explained previously by Ross Gittins:

What economists know but try not to think about – and never ever mention in front of the children – is that immigration carries a huge threat to our productivity.

The unthinkable truth is that unless we invest in enough additional housing, business equipment and public infrastructure to accommodate the extra workers and their families, this lack of “capital widening” reduces our physical capital per person and so reduces our productivity.

Think of it: the very report announcing that our population is projected to grow by 16 million to 40 million over the next 40 years doesn’t say a word about the huge increase in infrastructure spending this will require if our productivity isn’t to fall, nor discuss how its cost should be shared between present and future taxpayers.


In practice, however, the solution is not that simple. In already built-up cities like Sydney and Melbourne, which also happen to be the major magnets for new migrants, the cost of retrofitting new infrastructure to accommodate greater population densities can become prohibitively expensive because of the need for land buy-backs, tunneling, as well as disruptions to existing infrastructure.

In the case of Sydney, we have already witnessed these diseconomies of scale with: 1) the North West Rail Link, which is expected to cost an astounding $8.3 billion; 2) the WestConnex road project – the $17 billion 33 kilometre motorway under construction that is more expensive per kilometre than the Chanel Tunnel; and 3) the F6 freeway extension in southern Sydney, which is estimated to cost an insane $14.5 billion.

Not only are these projects hideously expensive, but they often create major indigestion for Sydney residents during the construction phase. Moreover, in the case of WestConnex, existing free public roads like the state-owned M4 (that have already been paid off) will be tolled to help fund the project, raising costs for residents.


The story is similar in Melbourne – whose population is expanding at an unprecedented rate – with expensive projects like the $11 billion Metro Tunnel and the $5.5 billion West Gate Tunnel currently under construction.

Regarding the latter project – the West Gate Tunnel – is was revealed last month in The Age that an expert was cut for voicing concerns about the efficacy of the project to Victorian Treasurer, Tim Pallas:

A transport expert employed by the Andrews government to assess Transurban’s proposed West Gate Tunnel was moved off the project immediately after raising his concerns about it directly with Treasurer Tim Pallas, a Senate hearing has been told.

Transport modelling and economics expert William McDougall… was employed by the Victorian transport department in 2015 to assess Transurban’s planned $5.5 billion toll road through Melbourne’s west…

Mr McDougall was auditing aspects of the business case being developed to justify this proposed public expenditure.

So alarmed was Mr McDougall by what he believed to be the weak economic case for Transurban’s toll road that he personally contacted state treasurer Tim Pallas to raise his concerns…

“I raised my concerns at a higher level and it was about a week after that I was unexpectedly taken off the project,” Mr McDougall said…

Mr McDougall… told the public part of his hearing that he and another expert employed to review the project, New Zealand transport planner and strategist John Allard, “were both extremely concerned” about both the economic and transport modelling behind Transurban’s proposed motorway…


Today, The Age reports that the Andrews Labor Government is trying to keep Victorians in the dark about the West Gate Tunnel Project by keeping an expert’s report critical of the modelling confidential:

The report by New Zealand transport expert John Allard is critical of traffic modelling done by project builder Transurban and the government.

That modelling helped Premier Daniel Andrews justify his support for the toll road, and to claim it would return $1.30 to the Victorian economy for every $1 spent building it.

Despite Mr Allard’s report and equally negative findings of another government-appointed consultant who reviewed the plan, the road is proceeding.

The move to keep the negative report confidential leaves government-appointed experts in the unusual position of having to decide whether to force its release.

…the Andrews government last year released a near identical transport assessment – this time for the business case behind the Melbourne Metro Tunnel rail project. That assessment, also done by Mr Allard, made positive findings…

The [Melbourne City] council wants the Allard report released, believing it will bolster its argument that key aspects of the toll road do not stack up.

Its barrister, Nick Tweedie, SC, told Planning Minister Richard Wynne’s experts that the peer review documents should be released so the road project could be properly assessed.

“We can’t see any benefit to the state or to the public interest in continuing to suppress them”…

The traffic modelling behind the project was crucial, and any document questioning it should be made public, he said…

Those traffic projections – which helped Mr Andrews label the East West Link a “dog of a project” – were done by the same company, and even commissioned by the same transport department officer now overseeing the West Gate Tunnel…

We witnessed similar shenanigans with the East-West Link farce, which ended up being scrapped by the incoming Labor Government at a cost of $1 billion to taxpayers.


More broadly, the 2013 Productivity Commission (PC) final report on An Ageing Australia: Preparing for the Future projected that Australia’s population would swell to 38 million people by 2060 [since upgraded to 40 million] and warned that total private and public investment requirements over the 50 year period are estimated to be more than 5 times the cumulative investment made over the last half century:

Total private and public investment requirements over this 50 year period are estimated to be more than 5 times the cumulative investment made over the last half century, which reveals the importance of an efficient investment environment…
ScreenHunter_15679 Oct. 25 14.39

Blind Freddy can see that running a turbo-charged immigration program requires massive investment and costs a lot, and that these costs are made worse by the diseconomies of scale and political incompetence discussed above.


Clearly, the most obvious and least cost policy solution to mitigate the big cities’ infrastructure woes is to significantly dial back Australia’s immigration program and forestall the need for costly new infrastructure projects in the first place. Because under current mass immigration settings, expensive solutions like the ones mentioned above will be required over and over again as rapid population growth continually outstrips the supply of transport infrastructure.

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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.