The federal government has already provided one bailout to Victoria by delivering the state $3.8 billion in additional GST revenue, while New South Wales lost $188 million:
Victoria’s North-East Link project, which is being built between the Eastern Freeway and the M80 Ring Road in Greensborough, was initially estimated to cost $15.8 billion but is now expected to cost $26 billion.
Transport experts blame the $10 billion overrun on costly CFMEU disruptions, a poor tender process, and costly design decisions that cater to environmental and community groups.
“The contractor doesn’t lose money”, a senior manager who has worked on the project with a top-tier builder told The AFR.
“It’s almost a costs-plus model. There’s very minimum incentive for construction companies to run the job efficiently and effectively. Who cares if the costs blow out if the state will pick up the tab?”
“The benefits were highly overstated and optimistic to start with”, William McDougall, a transport specialist said.
“My main concern back then was the business case didn’t stack up. The more the costs increase, the worse that equation becomes. It’s all very opaque”.
“If you look at increasing construction costs, it doesn’t account for all the extra costs we are seeing, which are a bit of a mystery”.
Last week, it was revealed that the federal government would effectively bailout Victoria’s North-East Link project, with Prime Minister Anthony Albanese stating that $3.2 billion in Tuesday’s federal budget would be directed to the “great project”.
This will increase the federal funding commitment to $5 billion, for the $26.1 billion toll road, which is on track to become the most expensive in Victoria’s history.
The Victorian government has stubbornly stuck with the $200 billion Suburban Rail Loop (SRL) project against the clear advice of infrastructure experts, who wanted the project canned.
These experts warned that the SRL would be a $200 billion waste of money, yet the government has decided to build it nonetheless.
According to the Victorian budget, the Allan Government continues to expect the Albanese Government to make “a matching contribution” to the SRL in addition to its initial investment of $2.2 billion over three years:
Source: Victorian Budget 2023-24
If this occurs, it will be another form of bailout for a wasteful project that should never have been undertaken in the first place.
Interesting enough, Catherine King, the federal infrastructure minister, cancelled 50 projects worth $7.3 billion in November of last year after commissioning a review.
King justified the cancellations by claiming that the costs of 700-plus projects had increased by $32.8 billion.
Hilariously, the Victorian government’s SRL was excluded from the projects the review could recommend be axed, as all federal election promises were exempted from consideration.
However, the review did warn that the SRL represented a risk to the federal government’s road and rail budget, with the first two stages of the project alone tipped to cost in excess of $200 billion.
“It was clear more money would be needed for the Suburban Rail Loop, which has the potential to blow out the 10-year funding envelope”, a source with knowledge of the findings told The AFR.
If the federal government does end up providing more funding for the SRL, it will be another form of bailout for a wasteful project that should never have been approved in the first place.
