The business case used by Victoria to request $11.5 billion for the first phase of its controversial Suburban Rail Loop contained information gaps and used a questionable methodology to calculate the project’s benefits.
The shortcomings prompted the Infrastructure Department to warn the Morrison government in 2021 that SRL East did “not present a reasonable investment”, according to the findings of an Australian National Audit Office investigation published on Wednesday.
The ANAO, which is responsible for ensuring all federal government funds are spent legally, revealed the advice as part of its probe into federal Labor’s $2.2 billion 2022 election pledge to the project.
The investigation was sparked by a referral from opposition infrastructure spokeswoman Bridget McKenzie.
The Infrastructure Department twice advised the Coalition against handing over money, while Infrastructure Australia in mid-2021 said the level of detail provided was inconsistent with beginning construction in 2022.
Overall, the ANAO found that as federal government funding was yet to be paid out and had to be signed off by Infrastructure Australia, no wrongdoing had taken place.
Infrastructure Minister Catherine King on Wednesday reiterated that the federal contribution to the $34.5 billion SRL East was capped at $2.2 billion and also dependent on Infrastructure Australia sign-off.
But the ANAO report showed Ms King was told about the worrying advice provided to the Morrison government soon after taking office. The advice raises doubts about the viability of the rail project.
The Australian Financial Review in May revealed that Ms King’s hand-picked review of the infrastructure pipeline warned the SRL represented a serious risk to the federal government’s 10-year budget for road and rail funding.
If approved, the first phase of the SRL alone would account for 10 per cent of the 10-year federal Infrastructure Investment Program and would probably require other projects be delayed or cut to stay within the existing funding.
It is the only project in the program – which comprises several hundred road and rail projects – where the total cost and the Australian government’s share of the total cost is simply marked as “TBC” on official documents.
After the Infrastructure Department in 2021 expressed its dim view of the SRL, the Morrison government ordered an external consultant to review the assumptions and modelling used in the Victorian government business case.
“The analysis [identified] issues such as uncertainty in the assumptions used in the business case and that further work was required to have confidence in the funding and rationale of the project,” the ANAO report said.
The ANAO also confirmed reports in the Financial Review that the Victorian government has failed to hand over critical information about SRL East for almost two years since it was requested in 2022, which has delayed both the $2.2 billion initial commitment and its bid for a further $9.3 billion.
When Victoria sought a further $9.3 billion ahead of the 2024-25 federal budget, Ms King responded that the request would be pushed back to a future budget because “it was unclear if the costs have been fully realised and reflect a definitive final cost for the project”.
Taxpayers were forecast to provide the first $400 million towards the SRL this financial year, followed by $1 billion in 2025-26 and $800 million the year after, but the timeline was pushed back 12 months in the budget.
The ANAO report showed a “merits review” into election promises above $5 million announced by Ms King was scrapped after her department said the discretion to fund projects was so wide, the review was “unlikely” to rule out any of Labor’s pledges.
“There is no evidence that this advice was formalised or a review of election commitments was provided to the minister,” the ANAO said.
Senator McKenzie said the revelation that the review was scrapped showed Labor’s “cynical self-righteousness on funding”.
“Evidently, Labor needed the $2.2 billion included in the October budget, ahead of the Victorian election to be held the following month, to give the impression former Victorian Labor premier Daniel Andrews’ controversial and unfunded pet project could be delivered,” she said.
“Labor has tried to cloak itself in ‘integrity’ but the ANAO has exposed the Labor government’s naked political deal-making.”
Melbourne teal MP Zoe Daniel, who has long held concerns about the viability of SRL East, said the ANAO report showed no more federal taxpayers’ money should be provided until Victoria provided a business case that proved the project stacked up.
“The fact that the ANAO was given only partial insight into what happened because much of the process happened verbally does not pass the public transparency test, nor the level of integrity that Labor promised,” she said.
AFR
