Tender documents for the East West Link being delivered to the government

With the Victorian state election almost done and dusted, it’s timely to take a closer look at some of the misconceptions being kicked around in relation to the previous government’s East West Link motorway, a key Liberal election promise that we’ve set in stone.

It’s a bad project in my opinion, but misconceptions should be corrected because even politicians need to be aware of their own bullshit.

Myth 1: The election was a referendum on East West Link

The East West Link was just one issue among many that voters across the state considered in the lead-up to polling day. There’s no way to reliably isolate what Saturday’s election result says about voter attitudes on a specific issue like this.

Labor’s statewide primary vote only went up by around 1.7%, and the Greens’ vote barely moved. That’s enough to change government in a two-party system because of the geography of electorates, but it doesn’t tell us how much weight the Victorian electorate gave to this specific issue or what their view on it was.

In any event, opinion polls consistently show that other issues, like health and education, are more important to Victorians than transport.

What can be reasonably claimed from the election result is that Premier-elect Dan Andrews has a mandate to repudiate the East West Link contract and that he will break a clear promise if he consents to the project going ahead.

I think it’s also reasonable to infer that the East West Link was a very important issue for voters living in the inner city. But they’re only around 5% of all the voters who determine the make-up of the Victorian Parliament and the government.

Myth 2: Victoria won’t get the $3 billion promised by the federal government for the road

Tony Abbott promised $3 billion for East West Link but now says he will withdraw that funding if the project does not go ahead. But it’s not accurate to say those funds are in some way earmarked for public transport or that Tony Abbott would be out of line if he persists with his intention of taking the money back.

Former prime minister Julia Gillard said last year she would provide $3 billion for Melbourne Metro if she won the 2013 election. She went on to say the funds would not become available until circa 2020 — i.e. after three federal elections. The funds were not budgeted.

When he was opposition leader, Abbott stated publicly that he would contribute funds for the East West Link if he won the election and that he would not fund urban public transport. That’s unfortunate, but he made his position crystal clear.

He duly won the election and did what all new governments do: he wiped the slate clean. The Gillard/Rudd promise, like all previous undertakings of former governments, was null and void.

To argue that Victoria is still “owed” $3 billion for Melbourne Metro is a bit like saying the $2 billion Denis Napthine was going to spend on the East West Link should now only be spent on roads. Abbott should fund urban rail, and political expediency might ultimately lead him to him decide to leave the disputed funds with Victoria, but he’s not under an obligation to do either. It’s not “the same money”.

Myth 3: East West Link would cost $18 billion, just for the eastern section

That figure isn’t just the capital cost. It also counts financing and operational costs, ignores the revenue from tolls, and is expressed in nominal terms. If the cost of the proposed Melbourne Metro — which has an “official” capital cost of $9 billion — were estimated in the same way it would be somewhere in the stratosphere.

Ironically, it’s the same highly politicised exaggeration the Coalition regularly used to portray the cost of the previous Labor government’s desalination plant. As Josh Gordon of The Age said a few weeks ago:

“The government may well whinge about using the nominal costs in such a way, yet this is exactly the same methodology it has used to attack Labor over the desalination plant. Indeed, on Monday Treasurer Michael O’Brien was busy reminding voters the plant will cost $18.3 billion over 27 years, a figure that is similar to the estimated total cost of the first half of the East West Link.”

A widely cited report signed by 10 academics was a source of the quoted number. Fortunately, the report also expresses the net cost to the taxpayer in “net present value” terms (but not in the summary).

Net present value (NPV) is the customary and eminently more useful way of describing costs because it recognises that a cost (or revenue) incurred 25 years down the track is not worth as much today. It provides a consistent basis for comparing and assessing projects.

The academics’ report estimates the total net financial cost to the state of the East West Link over 25 years, taking account of financing and operational costs and allowing for toll revenue and associated operational costs, would be $3.3 billion (NPV) if the average toll were $7.69, and $6.3 billion if the average toll were $5.67.

Former treasurer Michael O’Brien insisted those numbers were too high; but of course he never showed us the figuring. Fingers crossed we’ll see more when Andrews honours his undertaking to make the business case for the East West Link public this week.

Those numbers might still be too high a price to pay for the dubious benefits of the East West Link, but the public interest isn’t served by all sides wantonly politicising the use of data.

The Coalition got a deserved taste of its own medicine on this issue. As a citizen, though, I want all sides of politics to tell me the real cost of projects like the desalination plant and the East West Link so I can make my own judgements; the pursuit of point scoring and political advantage is no justification for feeding bullshit to voters.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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