Calls to remove Dan’s $120 billion commuter rail loop boondoggle

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

It seems to have emerged from his political circle rather than the railways, let alone transport economists. As originally presented, it was planned to run ninety kilometers around the inner and outer suburbs of Melbourne, largely in tunnels, with a number of stations to the south-east but very few to the Where is. The announced cost was 50 billion dollars, which no one believed…

The construction of the commuter rail loop means that the government will not have the resources to undertake other more urgent projects such as the second line of the underground, intended to link Clifton Hill to the massive redevelopment site of Fishermans Bend…

The commuter rail loop is the best example of a problem that not only plagues the Victorian budget but Australian politics in general… governments are focusing on what they call projects and what politically rewarding projects to announce, rather than service delivery. which offer the best value for money.

Transport experts then questioned the rubbery ‘benefit to cost ratio’ of between 1.1 and 1.7 that was belatedly attributed to the scheme, arguing that it represents poor value for money for Victorian ratepayers. [my emphasis]:

Questions over the business case come after an Age investigation revealed the lack of transport and economic planning on the big project when it was unveiled to voters by Prime Minister Daniel Andrews three months before the election of 2018. Gag orders and a codename were used to keep the project secret from the state’s top transportation bureaucrat and the agency overseeing the project.

The benefit-cost ratio of the project was also calculated using unconventional parameters that made it appear more financially sound…

Business cases typically show multiple benefit-cost ratios for a project under scenarios where 4% and 7% discount rates are applied, but the loop business case only shows one benefit-cost ratio under the more favorable scenario of 4%…

The benefit-cost ratio of the project also includes broader economic benefits, which goes against official recommendations…

Today, Grattan Institute’s Transportation and Cities Program Director Marion Terrill called for the Suburban Rail Loop project to be scrapped, noting that it is based on outdated pre-pandemic projections:

“The benefits are underpinned by the old work and travel patterns we had. The world is different now, we don’t really know… if we’re going to go back to something like we did before,” Ms Terrill said.

“Heavy rail is really stiff, not like a bus, you can’t really change your mind if the conditions don’t really warrant it”…

Ms Terrill said the project came about in secret and the government had provided little information about it “beyond the glossy images”.

Crystal Legacy, associate professor of urban planning at the University of Melbourne, asked why construction of SRL would start in the south east and not in the west, where proper public transport services were lacking.

“This is a critical area due to its growth and current high levels of car dependency, not equal access to good quality public transport,” she said…

Transport Minister Jacinta Allan said Melbourne would have a population of nine million by 2056, the size of London today.

This whole project was upside down to begin with and is a classic example of everything that is wrong with the provision of infrastructure in this country.

Standard due process would have required that a proper cost-benefit analysis had been undertaken before the project was approved and then announced. Instead, the draft was first announced to give the Labor government “announceable” shock and awe ahead of state elections amid voter concerns about excessive population growth, as well as to give the impression that the government had the situation under control.

This project has never been submitted for review by Infrastructure Australia or Infrastructure Victoria. No business case was done before his announcement. And the Victoria Department of Transport was not even made aware of the plan for fear it would try to block the project within government.

Then the project was given a rubbery “benefit/cost ratio” which was produced years later based on creative accounting to inflate the value of the project.

The commuter rail loop also highlights another hidden cost of mass immigration. The project was created to enhance Melbourne’s impact by nearly doubling in size to “a population of nine million by 2056, the size of London today” – something few Melburnians really want.

Instead of pushing away this one pointless project, maybe the Grattan Institute should represent Australians and push back against mass immigration instead?

We all know Grattan won’t do that. They are as committed to ‘Greater Australia’ as they are to the most fervent business lobby.

Leith van Onselen is Chief Economist at MB Fund and MB Super. He is also co-founder of MacroBusiness.
Leith previously worked at Australian Treasury, Victorian Treasury and Goldman Sachs.

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