Social maker

Watchdog considers Melbourne’s planned rail loop a huge loss-maker

Victoria Premier Daniel Andrews rejected an independent assessment of the rail loop proposed by his government, which concluded the multi-billion dollar project made no economic sense.

The Independent Parliamentary Budget Office (IPBO) estimated that Victorians would recoup as little as 60 cents for every dollar spent ringing greater Melbourne with the massive expansion of the existing public transport system.

The (IPBO) calculated the cost-benefit ratio (BCR) for the first two sections of the commuter rail loop to be between 0.6 and 0.7, well below a previous estimate of 1 to 1.7.

This means that for every dollar spent on the project – a 90 kilometer orbital rail line from Cheltenham to Werribee via Melbourne Airport – the state would reap between 60 and 70 cents.

A BCR greater than one indicates a net benefit to society. Governments often need a higher BCR to pursue policy goals or to choose between potential projects.

The figures were calculated by the government’s spending watchdog at the request of the Victorian opposition and released on Saturday.

The Opposition has pledged to tighten the brakes on construction of the first part of the line, from Cheltenham to Box Hill, and redirect cash savings to the healthcare system if it wins the November state election .

More expensive than expected

The rail loop was unveiled by Andrews’ Labor government as a major election policy in 2018 and the whole scheme was initially valued at a maximum of $50 billion.

A 400-page trade and investment brief, published in August last year, later showed that the eastern and northeast sections alone could cost up to $50.5 billion.

However, the Parliamentary Budget Officer released a report this month that said building its first two stages could cost taxpayers $125 billion.

The business case also indicated that the first two parts of the loop had an RAC between 1 and 1.7.

In BCR’s analysis, the budget office used its $200 billion estimate of future costs to build and operate the East and North SRLs and considered an economic assessment by KPMG prepared in February 2021.

First beg to differ

“We do not estimate benefits independently, however, we note that quantifying the value of expected social benefits is less certain and inherently more difficult than estimating cash flows, and is therefore more subjective,” the report says. report.

Shadow Treasurer David Davis seized on the BCR’s new blackout to declare the rail loop project does not stack up.

“This November, Victorians have a clear choice. Real solutions to solve the health crisis now, or an overpriced rail line through Melbourne’s southern suburbs 13 years from now,” he said in a statement on Sunday.

Premier Daniel Andrews disagreed with the independent assessment, saying there were “accounting issues” despite the PBO discounting the benefits and costs by 7%, in line with the framework. evaluation of Infrastructure Australia.

“We can have an accounting debate for as long as people want,” he told reporters.

“The key point is this: keep going and get things done. Don’t let another government do what you need to do and what the community needs.