[+] Feds Swing Axe as Infrastructure Review Reveals Dead Wood

It was the news many were waiting for—what has survived the Labor Federal government’s review of the previous government’s infrastructure projects. Federal Infrastructure, Transport, Regional Development and Local Government minister Catherine King announced the review in May after the states and territories agreed on it at the April National Cabinet meeting. An initial review was done as part of the October 2022-23 Budget to determine market capacity and inflationary pressures. Now, the independent strategic review of the Australian government’s Infrastructure Investment Program (IIP) has recommended that 50 projects that had not started be scrapped and the money put aside for potential cost blowouts on other projects. “Many projects lacked proper planning, didn’t have informed costings and weren’t ready for Commonwealth investment,” King says. “The reviewers found an estimated $33 billion of known cost blowouts on projects in the infrastructure investment program. “And they said there was a high chance that this would blow out even further. ▲ Victoria’s Suburban Rail Loop East project was one of many of big-ticket developments under review. “For those not currently under construction, the report says that figure is around $14.2 billion.” The review found it was impossible to deliver the 10-year pipeline of projects within the $120 billion allocated to the program. It said many were given a federal funding commitment too early and before detailed planning, design and costing were undertaken. Other recommendations from the review included that 100 planned projects proceed, while 56 projects will proceed with some risks satisfied prior to delivery. It also recommended that 36 projects complete planning, detailed costing and rescoping, and that funding for those projects be used for headroom in the IIP. King said around 50 projects would have their funding cut, 400 would proceed, and many of the other 350 projects grouped in corridors where they would proceed as planned. State governments would then treat those groups as rolling programs, proceeding with each stage and using all allocated funds for that corridor until more funding was necessary. “We want states to be able to manage those projects better, streamline the administration, sequence those projects and then see it as a rolling series so that when that money starts to expire, the states will come to us as part of the budget process and seek further money for those corridors,” King says. ▲ Catherine King says that some projects will be treated as part of corridors. The projects that survived Though many projects have not had their funding cut, many have not had their funding increase. Victoria In Victoria, that is the case for the Suburban Rail Loop East project—it has had a total investment of $2.2 billion, which will not be increased. The Ballarat Intermodal Freight Hub ($9.1 million), Bendigo/Echuca Rail Line Upgrade ($168.7 million), Gippsland Logistics Precinct Stage 2 ($10 million), Gippsland Rail Line Upgrade ($447.7 million), Melbourne Airport Rail Link ($5 billion), Murray Basin Freight Rail Project ($334.7 million) and the North East Link ($1.75 billion) will all proceed as planned. However, the Geelong Fast Rail project will not be federally funded, nor will the business case for the Melbourne Inland Rail Intermodal Terminal. New South Wales In New South Wales, the M12 Motorway ($1.63 billion), the North West Growth Corridor Planning and Early Works ($75 million), the Sydney Metro—West Sydney Airport ($5.1 billion), the Sydney Metro—West Sydney Airport Stage 2 Business Case ($77.5 million), and the West Sydney Freight Line and Intermodal Terminal Strategy and Business Case ($5 million) will all proceed as planned with no additional funding. Faster rail upgrades will not be funded with the Sydney to Newcastle—Tuggerah—Wyong faster rail upgrade project losing out. Australian Capital Territory Canberra’s $218 million Light Rail Stage 2 upgrade will proceed as will the Monaro Highway upgrade for $115 million. ▲ Work is currently under way on the Western Sydney Airport. Tasmania All the tranches of Tasmania’s Freight Rail Revitalisation project promised federal funding will proceed as planned with no additional funding. South Australia South Australia’s Nationwide Freight Highway Upgrade Program with $400 million in funding will proceed with no additional funding along with the South Eastern Freeway Upgrade at $120 million. Queensland Faster rail has won Queensland additional funding with the Brisbane to the Gold Coast (Kuraby—Beenleigh Faster Rail Upgrade) project getting an additional $1.754 billion in federal funding through the IIP for a total of $2.875 billion. WINNERS: Full list of projects with additional federal funding Brisbane Metro projects and Stage 3 of the Gold Coast Light Rail project will proceed without additional funding as will the $1.06 billion Coomera Connector Stage 1 project from Coomera to Nerang. The business case for Brisbane Inland Rail Intermodal Terminal project and the business case for Toowoomba to Gladstone Inland Rail connection project will proceed as planned without additional funding to the $10 million already allocated to each. Developing the business case for South East Queensland’s growth due to the Brisbane Olympic and Paralympic Games in 2032 will proceed with its current funding of $22.45 million. The Direct Sunshine Coast Rail Line will receive an extra $160 million for a total of $1.44 billion in federal funding via the IIP and the Inland Freight Route from Mungindi to Charters Towers upgrades will get an additional $80 million for a total of $720 million. How the news has been received The changes to funding have implications for many of the state governments, according to Moody’s Investors Service vice president John Manning. “The decision is credit negative for the State of New South Wales, (NSW, AAA stable), the State of Victoria (Victoria, AA2 stable) and, to a lesser extent, the State of Queensland (Queensland, AA1 stable),” Manning says. “These three states will be the most heavily impacted as a result of the changed funding arrangements, which will require a reassessment of capital spending priorities to offset any funding shortfalls from the Commonwealth within their existing portfolios.” Increased labour and material costs are named as the causes of the cost blowouts. ▲ The Direct Sunshine Coast Rail Line will receive an extra $160 million. “Some states will need to reprioritise other expenditure commitments to meet broader budget repair targets because some projects have already been contracted to the state and these projects will now lose their share of Commonwealth funding,” Manning says. “Such projects include the NSW M7/M12 interchange (which is contracted to the NSW government-owned corporation Transport for NSW), which will lose $116 million in Commonwealth funding.” LOSERS: Full list of projects with federal funding cuts Moodys does not anticipate a credit impact on Western Australia, South Australia, Tasmania or the Northern Territory. It does, however, foresee a funding gap of between $500 million to $1 billion during the next six to nine months for NSW alone. NSW treasurer Daniel Mookhey said that at a time when the state’s population is increasing, the federal government’s investment is decreasing. Urban Taskforce chief executive Tom Forrest agrees, citing his dismay at the withdrawal of funding for the M7/M12 interchange, crucial infrastructure for the Western Sydney Airport. “Elizabeth Drive is a two-lane goat track—without the M7/M12 connection, it is impossible for workers and passengers to get from Parramatta, Blacktown or Liverpool to the new airport,” Forrest says. “There is no aviation fuel pipeline to the airport—so there will be hundreds of truck movements each and every day required just to ensure the planes servicing the new airport have fuel and this decision is a critical blow to investor confidence in Western Sydney.” ▲ Queensland minister for transport and main roads Mark Bailey. But others are calling on the state governments to follow the fed’s lead. “The biggest potential obstacle is federal co-ordination with the infrastructure plans of the states and territories,” Ai Group chief executive Innes Willox says. “We urge all governments to support the review, to adopt a similar approach and to commit to transparent, rigorous and ongoing audit and review. Willox says funds had been allocated to “sub-optimal projects” and this was a much-needed correction. Other recommendations The review also recommended that the funding split change from 80:20 to 50:50 between federal and state funding for any new projects. Queensland transport and main roads minister Mark Bailey says Queenslanders will be worse off. “The decision ... has been estimated by the Department of Transport and Main Roads to cost Queenslanders between $600 million and $1 billion per annum,” Bailey says. “This is on top of cuts made elsewhere in Queensland, such as the decision to cease funding projects including the Mooloolah River interchange, the cap on funding on road corridors and changes to funding splits on existing projects.” Bailey says the Queensland government will contest this new split in funding arrangements. “Although Queensland has only the third largest population of any state, our vast state has the largest regional road network in the nation so the proposed change has the largest impact on regional Queenslanders than regions in any other jurisdiction.” Creating long-term infrastructure plans in conjunction with each state and the federal government was also recommended as was a mandatory gateway assurance process, and an independent assurance review process. 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Infrastructure
Marisa Wikramanayake
Tue 21 Nov 23

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