The government was criticised by some talking heads last night for not taking the opportunity in the budget to give greater emphasis to the differences between Labor values and Coalition values. One area, though, where there’s now a clear distinction between the two contenders is public transport. The budget surprised with funding for three rail projects:
- $0.71 billion for the Brisbane Cross River Rail;
- $3.0 billion for the Melbourne Metro; and
- $0.5 billion for Perth Light Rail (or construction of a new rail link to the city’s airport).
This creates a strong contrast with the Coalition. Opposition Leader Tony Abbott has already made it very clear he thinks the Commonwealth’s role in cities should be limited to funding roads, not public transport.
He’s promised $1.5 billion for Melbourne’s proposed east-west link road tunnel and another $1.5 billion for Sydney’s proposed WestConnex freeway, but he says there’s no historical basis for Commonwealth involvement in funding urban rail lines. The promises on both sides smack loudly of political strategy, not good public policy.
The east-west link and WestConnex are each at an early stage in Infrastructure Australia’s four-stage priority list. Their benefit-cost ratios are uncertain, and in the case of the former is thought by many observers to be negative.
The Melbourne Metro and Cross River Rail projects look a lot more responsible. They are both in Infrastructure Australia’s final ready to proceed category and both have positive benefit cost ratios (1.3).
However, the status of the two alternative Perth projects is unclear — neither of them is on Infrastructure Australia’s priority list. The fact that Commonwealth funding is provided on an “either/or” basis for two entirely separate projects suggests to my jaded eyes that politics is the main driver of the decision.
The government’s funding for the rail projects is on a matching basis with the states and is spread over a number of years. It’s unlikely much of the funding would be paid down by 2016-17, so it’s not clear that it’s even budgeted in the practical sense. It looks like smoke and mirrors.
The private sector is also assumed to be a major contributor of capital. Budget Paper No 1 has a lot to say about the importance of private sector involvement in infrastructure provision:
“The Government is also looking to utilise new funding and financing arrangements to help attract private sector involvement in the Melbourne Metro and Brisbane Cross River Rail ‘mega projects’.”
Investors would most likely be involved via “availability payments”. This approach minimises government borrowings but also minimises the risk borne by investors. The result is taxpayers pay more — probably much more — than they would if governments borrowed directly. It appears the Commonwealth is prepared to fund half the availability payments, effectively boosting it’s offer in the case of Melbourne Metro to half the total $9 billion cost.
Last night’s budget also provides funding for major new urban road projects:
- $0.72 billion to upgrade and widen Brisbane’s Gateway North Motorway;
- $0.52 billion to complete the widening of Melbourne’s M80 Ring Road;
- $1.8 billion for WestConnex;
- $0.4 billion to build a tunnel linking the F3 with the M2; and
- $0.45 billion to upgrade South Road, Adelaide.
There’s nothing for the east-west link, though, presumably sharpening the choice for Melburnians between Labor (rail) and the Coalition (road).