Victoria’s financial situation is dire, as projections indicate that the state’s debt will increase from $155.5 billion to $194 billion by FY29.
Victoria’s per capita debt, already the highest in the nation, is projected to rise from $21,900 currently to $25,500 in FY29.
Ratings agencies have warned that they will downgrade Victoria’s credit rating, which is already the worst in the nation, if the state does not bring debt under control.
Arguably, the biggest financial risk facing the state is the gigantic Suburban Rail Loop (SRL) project.
Source: Victorian Budget 2023-24
The first stage (SRL East) is budgeted to cost $34.5 billion. To date, the state government has only secured $11.8 billion in funds, with an additional $2.2 billion coming from the federal government.
The Victorian government intends to raise $11.5 billion in funding through value capture, which entails charging homeowners and businesses along the SRL line. It also hopes to secure an additional $9.3 billion from the federal government.
Infrastructure Australia in March issued a critical report on the SRL, implying that additional federal financing will not be forthcoming.
With the federal government unlikely to grant more funds for SRL East, there is little chance that it will provide funding for the project’s last two phases, which are similar in size and cost.
Chip Le Grand, state political editor at The Age, called on the Victorian government to cancel the SRL before it is too late.
Le Grand estimates that canceling the project would cost taxpayers around $3 billion and notes that the government has around six months to cancel it before tunnel drilling commences.
“Between now and December, the government can walk away from this gargantuan folly at a justified cost”, Le Grand wrote. “Beyond that, the state will have no choice but to sink good money after bad, irrespective of who is premier or which party forms the next government”.
“The SRL would still represent an obscene waste of money but splashing $3 billion against the wall would, in the upside down fiscal reality of Victoria, be a responsible thing to do if it saved the state another $30 billion to $50 billion over the next decade, depending on your best guess of the final cost of this project”.
“By December, when the first of four tunnel boring machines is due to arrive in Melbourne from Herrenknecht’s manufacturing plant in southern China, that won’t be a viable option any more”, Le Grand wrote.
I have argued repeatedly that the biggest losers from the SRL would be residents of Melbourne’s booming northern and western suburbs, who will be starved of infrastructure investment for a generation to make room for the SRL.
Over the next decade, projections indicate that these areas of Melbourne will experience the fastest population growth in Australia:
Amazingly, the Melton and Wyndham lines still haven’t been electrified, despite repeated state government promises to do so.
As a result, these residents are reliant on intermittent and overcrowded diesel V-Line trains, buses, and driving to commute to Melbourne’s CBD.
Indeed, a secret government report leaked by The Age warned that passengers will face “crush” conditions at train stations across Melbourne’s fast-growing northern and western suburbs without an urgent overhaul of the rail system.
“Without any action within the next five to 10 years, dozens of commuters will be left stranded on platforms every time a train comes”, The Age reports.
“The report’s key finding is that due to significant population growth in the north and west of Melbourne – more than twice the population of Canberra is forecast to move into this region in the next 15 years – there is an urgent need to begin detailed development of rail capacity-boosting projects in the north and west,” then Department of Transport secretary Paul Younis wrote in a letter to his Commonwealth counterpart a year ago.
The electrification and expansions required to ease the crush are estimated to be comparable to the $34.5 billion SRL East.
In other words, growth areas like Melton and Wyndham will continue to suffer as the SRL devours the state’s infrastructure budget for a generation.
Chip Le Grand says it best with the following statement:
“How can a Labor government, in good conscience, prioritise another rail line for a part of Melbourne already well serviced by public transport above the provision of basic transport services for communities living in neglected parts of the city?”
Those are my sentiments exactly.
Why should Victorians be saddled with crushing debt to fund a rail loop to nowhere that nobody asked for?
And why should Melbourne’s under-resourced growth areas miss out to make room for the SRL?
