Melbourne @9 million is a Bladerunner set

The Herald-Sun has published a spruik piece on how Melbourne’s suburbs will enjoy a “jobs and high-rise population boom” following the construction of the Suburban Rail Loop:

The Suburban Rail Loop project linking middle-ring suburbs will spark a jobs and high-rise population boom, helping to ease Melbourne’s “unsustainable” urban sprawl.

Suburbs such as Cheltenham, Glen Waverley and Box Hill will be transformed, as Melbourne leapfrogs Sydney as Australia’s biggest city by early 2027, and marches towards a population of nine million by 2056.

The business case used to justify the Suburban Rail Loop, which would create a circular rail network between Cheltenham and Werribee, says without increasing density in middle suburbs the city’s liveability would plummet…

“Unless plans to manage population and employment growth are supported by the right infrastructure, Melbourne remains at risk of ongoing unsustainable urban expansion, increasing congestion, flatlining economic growth and declining liveability,” it says.

“Victoria is now expected to grow to 11.2 million people by around 2056 and greater Melbourne will reach around nine million people – a similar size to London today.”

This entire project was back-to-front to begin with and is a textbook example of everything that is wrong with infrastructure provision in this country.

Standard due process would have required a proper cost-benefit analysis to have been undertaken before the project was approved and then announced. Instead, the project was announced first to give the Labor Government a shock-and-awe ‘announceable’ in the run-up to the State Election amid voter concerns about excessive population growth, as well as giving the appearance that the Government had the situation under control.

This project was never submitted for assessment by Infrastructure Australia or Infrastructure Victoria. There was no business case conducted before its announcement. And Victoria’s transport department wasn’t even told about the plan for fear that it would attempt to block the project from within government.

Now we have a rubbery ‘benefit-to-cost ratio’ produced years later based on creative accounting to inflate the project’s worth.

Don’t just take my word for it.

Late last year, Inside Story’s Tim Colebatch labelled Dan Andrews’ Suburban Rail Loop “the worst transport project Melbourne has ever seen”:

The government’s commitment to build the worst transport project Melbourne has ever seen: the so-called Suburban Rail Loop… Tunnels eat money, and the demand for this one is likely to be small. No business case has been produced, and no cost–benefit analysis, but it will cost taxpayers tens of billions of dollars…

It appears that this emerged from his political circle rather than from the railways, let alone transport economists. As originally presented, it was intended to run for ninety kilometres around Melbourne’s middle and outer suburbs, largely in tunnels, with a number of stations in the southeast but very few in the west. The cost was claimed to be $50 billion, which no one believed…

Building the Suburban Rail Loop means the government will not have the resources to take up other, more urgent projects such as the second line of the Metro, intended to run from Clifton Hill to the massive redevelopment site of Fishermans Bend…

The Suburban Rail Loop is the prime example of a problem that afflicts not only the Victorian budget but also Australian politics generally… governments focus on what they brand as their projects, and which projects are politically rewarding to announce, rather than on delivering services to us that provide the best bang for buck.

Transport experts have also questioned the rubbery ‘benefit-to-cost ratio’ of between 1.1 and 1.7 that has been belatedly ascribed to the project, arguing that it represents poor value for money for Victorian taxpayers [my emphasis]:

Transport economist John Stanley, the architect of Plan Melbourne, which is the policy framework underpinning the Suburban Rail Loop, said that figure should be much higher.

“With a project like this, that has so much uncertainty about what the cost will turn out to be, I would want a higher benefit-cost ratio than that,” Professor Stanley said. “I wouldn’t be comfortable with that BCR range to build a project like this”…

Transport planner William McDougal said the economic case for spending many billions of dollars on the loop needed to be “compelling”.

The business case said that just a portion of the project, about 60 kilometres between Cheltenham and the airport, would cost between $48.5 billion and $67.4 billion over the next 30 years, surpassing the government’s original $50 billion estimate for the entire build.

The questions over the business case come after an Age investigation exposed the lack of transport and economic planning on the major project when it was unveiled to voters by Premier Daniel Andrews three months before the 2018 election. Gag orders and a code name were used to keep the project secret from the state’s top transport bureaucrat and the agency charged with overseeing the project.

The project’s benefit-cost ratio was also calculated using unconventional parameters that made it appear more financially healthy…

Business cases typically show multiple benefit-cost ratios for a project under scenarios where 4 and 7 per cent discount rates are applied, but the business case for the loop only shows a single benefit-to-cost under the more favourable 4 per cent scenario…

The project’s benefit-cost ratio also includes wider economic benefits, which goes against official recommendations…

The bigger concern for Victorians is that their material living standards have stagnated for more than a decade. This is evidenced by Victoria recording the weakest growth in per capita GSP in the nation since the Global Financial Crisis (GFC) hit 13 years ago:

Victoria has also experienced the weakest growth in Gross State Income per Capita since the GFC:

Whereas Victoria’s Gross Household Disposable Income per capita was the second lowest in the nation as at 30 June 2021:

The reality is that Victoria’s entire economic model revolves around importing people and then providing homes, infrastructure and services to accommodate them. Victoria is Australia’s prime Ponzi economics state.

Sadly, the Suburban Rail Loop and projected population boom is more of the same: a plan to juice headline growth while per capita living standards collapse.

Unconventional Economist
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