States dig ever large holes to fill them in

There’s no end to it. Fresh from producing coast-to-coast budgets with headline surpluses but rising debt, a contradiction managed by shoving massive infrastructure spending off balance sheet, new projects are springing to life like mushrooms. In NSW the locusts are gathering to hijack Sydney West Metro:

Representatives from The Star Entertainment, Crown Resorts, Google, Lendlease, the owners of Darling Park office complex – GPT, AMP and Brookfield, Accorhotels, Business Events Sydney, the International Convention Centre (ICC) and the Sydney Business Chamber, among others, have met and are making a case for a new Metro station.

…Advisory group PwC estimate conservatively that the incremental economic output of this new precinct will be more than $20 billion over the first 10 years, and that the precinct will be NSW’s second largest economy behind only the CBD.

Pursuing this opportunity has been hampered by the number of authorities with responsibility for managing the precinct, and the absence of an operating framework consistent with the overall precinct’s agreed strategic purpose.

…Jostling is strong for new stations along the planned route that will extend to Sydney Olympic Park and Parramatta. Each new station costs close to $500 million.

But there are some concerns that adding too many stations along the route will extend the travel time, which defeats the purpose of having a fast train line.

But that is dwarfed by the Victorian Opposition who has in mind a giant Melbourne ring road:

A MEGA $30 billion road and tunnel network, including a redesigned East West Link beneath Melbourne, would be built by a Victorian Coalition government.

Staking his November election hopes on the “super highway” plan, Opposition Leader Matthew Guy will today promise to start construction on the East West Link and a North East Link by early 2021.

The Coalition will also pledge to finish Labor’s West Gate Tunnel, creating a triple bypass of toll roads that would allow motorists to drive from the northeastern suburbs to Geelong without hitting a single traffic light.

Mr Guy told the Herald Sun the city’s growth was outpacing its infrastructure, and a Coalition government would create “the biggest connected super-highway in Australia and get Victoria moving again”.

“We can’t keep playing this game of infrastructure catch-up. We have to start getting ahead,” Mr Guy said.

“Melburnians have never before felt under so much pressure. We are spending more time at work, more time stuck in traffic, and less time with family and friends.”

This is an enormous expansion on Labor’s West Gate Tunnel project which has already blown out by more than $1 billion to $6.7 billion.

This is no surprise at all and we can expect a much larger than $30bn bill for the Coalition plan if it ever arrives. The Productivity Commission explained why in its report Shifting the Dial: 5 year productivity review, released in October, in which it explicitly noted that infrastructure costs will inevitably balloon due to our cities’ rapidly growing populations:

Growing populations will place pressure on already strained transport systems… Yet available choices for new investments are constrained by the increasingly limited availability of unutilised land. Costs of new transport structures have risen accordingly, with new developments (for example WestConnex) requiring land reclamation, costly compensation arrangements, or otherwise more expensive alternatives (such as tunnels).

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). But retrofitting is massively costly.

How to pay for it then? higher taxes is one way. The other is asset recycling. Private tolls roads and tunnels.

Which takes us back to West Gate and the Transurban cash flood:

Toll road operator Transurban will reap an estimated $15 billion in additional tolls until 2045 in return for coughing up $4.4bn to help fund the Andrews government’s $6.7bn West Gate Tunnel project.

The government unveiled the project yesterday and foreshadowed a deal handing Transurban a 10-year toll road extension on its existing CityLink toll road, in ­addition to above-­inflation toll hikes until 2045.

Under the plan, Transurban is expected to net an additional $15bn in toll revenue on CityLink, according to opposition estimates, while also profiting from variable peak-hour pricing and city access taxes on the West Gate Tunnel.

Former premier Jeff Kennett criticised the deal as “absurd” and slammed the government for forging ahead with Transurban despite never putting the $6.7bn deal to tender.

“Transurban is a very good company and very, very clever, but they’ve clearly got the government in their pocket,” Mr Kennett said…

Anybody with half a brain 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 dis-economies 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 Coalitions enormous ring road will be required over and over again as rapid population growth continually outstrips the supply of transport infrastructure. And these costs will be borne by incumbent residents either through higher taxes or tolls.

The few get richer at the expense of everybody else as the states effectively dig holes and fill ’em in again.