$15b airport rail tunnel highlights problem with in-fill infrastructure

In September last year, ACCC chairman Rod Sims warned state governments against accepting unsolicited bids for infrastructure projects:

“The ACCC considers that state governments should only award new toll road concessions through a competitive bid process, and not following an unsolicited proposal unless there is a truly compelling reason,” Mr Sims said.

“Accepted unsolicited proposals for new toll road concessions generally leads to higher costs for taxpayers, drivers, or both.”

Mr Sims’ comments on unsolicited proposals will put pressure on state governments who often like them as a quick, effective and often cheaper way for dealing with an infrastructure bottleneck or upgrade.

Shortly afterwards, the AirRail Melbourne consortium – which includes the owner of Southern Cross Station and part owner of Melbourne Airport, IFM Investors – offered to contribute $5 billion (on top of the state and federal government’s $10 billion) to own and operate the Airport Rail Link, with the service slated to “deliver a ‘reliable’ 20-minute travel time from the CBD to the airport for $20” and the consortium to “keep the ticket revenue”.

In November, the federal government approved the project: pledging $5 billion towards the project (on top of the State Government’s $5 billion). And in March, both the Federal and Victorian Governments signed a “heads of agreement” for the project.

The Morrison Government is now pressuring the Victorian Government to expedite the construction of the $15 billion Airport Rail tunnel:

Senior figures in the Andrews government are understood to be wary of committing to the tunnel option, with misgivings over the wisdom of having a key piece of Victoria’s rail network controlled by private players who would have enormous leverage over future developments of the system…

Federal Cities Minister Alan Tudge said the tunnel was key to achieving fast rail to Geelong, which the federal government promised to build before the election, offering up an extra $2 billion.

This is backed by rail experts and the mayor of Geelong, who warn that using existing train tracks would “jam in” Geelong, Ballarat and Bendigo services on heavily congested rail lines, making airport trains unreliable.

If this project goes ahead, taxpayers would contribute two-thirds of the cost ($10 billion), but IFM would receive all of the ticketing revenue in addition to funnelling passengers through its existing assets (Southern Cross Station and Melbourne Airport). That sounds incredibly sketchy.

Meanwhile, the existing SkyBus service – which costs taxpayers nothing – already achieves similar travel times at the same projected ticket cost.

Other than tourists and those living in the CBD, I cannot envisage many locals actually using an airport rail link. Why? Because they would still need to get to the CBD, where the cost of parking is equally exorbitant as the airport. This means passengers would either have to carry luggage on the public transport network, or catch a cab. In which case, why not just go directly to the airport and avoid the changeover hassles?

Let’s be honest, an airport rail link is a nice thing to have, but not at the projected $10 billion initial taxpayer investment (plus ongoing operational subsidies) when there are so many other more worthy projects screaming for funding.

The fact of the matter is that this project should have been first subjected to a rigorous business case and cost-benefit analysis before funding was committed, not after the fact. That the reverse is true shows just how busted Australia’s infrastructure system is.

The project also highlights the exorbitant cost of retrofitting our major cities with infrastructure to cope with their manic population growth.

Because our major cities are already built-out, and there is little surplus land, any addition rail lines or toll roads linking to the CBD necessarily need to be tunnelled, which costs a small fortune.

It’s far better not to create the congestion problems in the first place and slash immigration back to historical levels:

Because having Sydney and Melbourne each balloon to around 10 million over the next half century will require massive amounts of expensive retro-fitted infrastructure, with incumbent residents wearing the cost through higher taxes and user charges.

Leith van Onselen
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