As many as 50 major infrastructure projects will no longer receive Commonwealth funding across Australia as the federal government seeks to rein in the cost of the nation’s infrastructure program.
And a review into the nation’s infrastructure investment program has savaged the program, finding that the program was unable to be delivered within the $120 billion funding allocation and that there were significant problems in the way that programs are being assessed and funded.
On Thursday, Commonwealth Transport Minister Catherine King handed down the findings of an independent strategic review into the nation’s 10-year, $120 billion infrastructure program.
The review found that the ten-year pipeline of projects was not able to be delivered within the current $120 billion allocation even with current contributions from states and territories.
It found that across the infrastructure pipeline, there are an estimated $32.8 billion in known cost pressures.
This includes an estimated $14.2 billion in known cost pressures that relate to projects which are not yet under construction – though the report noted that detailed cost estimates are yet to be completed on many of these projects.
The review also found a litany of problems in the way in which the infrastructure program is being managed.
In particular, the review found that:
- There are many projects in the pipeline that ‘do not demonstrate merit, lack any national strategic rationale and do not meet the Australian Government’s national investment priorities’.
- A number of projects have been allocated a commitment of Commonwealth funding too early in their planning process and before detailed planning and credible design and costing were undertaken.
- As things stand, there is no current requirement for projects to be allocated federal funding based on alignment with long term national priorities. Furthermore, there is no requirement for jurisdictions to have a costed and sequenced transport plan for the Commonwealth to use as a starting point for funding decisions.
- The varying governance and assurance frameworks are insufficient to reassure the Australian Government, the transport industry and other stakeholders (including all Australians) that projects in the pipeline have been appropriately selected, designed, costed and delivered to achieve their stated outcomes.
- Cost pressures, cost escalations, delivery delays and changes to project scopes are being addressed by the Australian Government in a manner which is ad-hoc. These responses often fail to account for evidence of looming cost increases, fail to align with long-term plans and strategies and lack transparency and consistency.
- The number of projects in the infrastructure investment pipeline tripled between 2015 and 2022, with the majority of new projects added before the COVID-19 pandemic. Too many large-scale projects are receiving funding commitments without adequate planning, costings and programming to sufficiently manage the significant increase in delivery costs within a volatile market.
- Although the infrastructure investment pipeline was intended to fund projects that predominantly contribute to national productivity and growth, many small-scale and local projects were urgently funded as job stimulus measures in response to COVID-19. In addition to the large-scale projects underway and demand from other sectors, this is creating an unprecedented peak in demand for materials and skilled labour.
Of the more than 800 projects which are currently in the pipeline, the report recommended that 82 which have not yet commenced construction be not funded for now, with money saved being used to create headroom to deliver other projects within the investment pipeline.
A further 36 projects be subject to complete planning, detailed costings and rescoping whilst an additional 56 projects proceed to construction only if risks are able to be satisfactorily addressed prior to delivery.
In response, the Government has announced that 50 projects from the pipeline will not receive Commonwealth funding whilst a further 31 projects are being rolled into corridors (see here for list of projects that will be funded/not funded).
Any states wishing to proceed with these 50 projects will need to either fully fund the projects themselves or secure additional funding from private sources.
The 50 projects include:
- 17 in New South Wales including upgrades to the Great Western Highway; the Bruxner Highway from Wollongbar to Goonellabah; the M7-M12 Interchange; the Northern NSW Inland Port at Narrabri; Southern Connector Road at Jindabyne; faster rail from Sydney to Newcastle and planning for Stage 2 of the Oxley Highway and Stage 2 of the Werrington Arterial.
- 1 project in the ACT, being the Inner Canberra Corridor Planning Package in Canberra
- 12 projects in Victoria including the $4 billion Geelong Fast Rail project; the Melbourne Inland Rail Intermodal Terminal; rail line upgrades from Frankston to Baxter; stage one of the Shepparton Bypass on the Goulbourne Valley Highway and connectivity improvements to the Port of Melbourne.
- 9 projects in Queensland including upgrades to the New England Highway at Cabarlah; packages 1 and 2 of the Mooloolah River Interchange Upgrade; upgrades of High Road and Easterly Street at Waterford and upgrades of the Kenmore Roundabout.
- 6 projects in Western Australia including the Future Road and Rail Connections for Perth; Great Sothern Secondary Freight Network; upgrade of Marble Bar Road; upgrades of Moorine Rock to Mt Holland Road; and stages 1 and 2 of the Pinjarra Heavy Haulage Deviation.
- 5 projects in South Australia including the Hahndorf Township Improvements and Access Upgrade; Main South Road Productivity Package; Old Belair Road Upgrade in Mitcham; upgrade of the intersection and Onkaparinga Valley Road; and Tiers Road and Nairne Road
- 1 project in Tasmania, being the upgrade of the intersection of Old Surry Road and Massey-Greene Drive in the state’s north-west.
The $5 billion Melbourne Airport Rail Link project in Victoria will be built despite the fact that uncertainty remains around delivery dates and the final location of the proposed station at Melbourne Airport.
The Victorian Government’s plans for the link include an above ground station at the terminal.
However, the Airport argues that a more expensive underground station is needed in order to ensure that passengers are adequately served and that neither the airport precinct or rail line are constrained as Melbourne’s population continues to grow.
The latest moves come amid growing concern about Australia’s capacity to deliver upon its large scale of infrastructure work.
Over the ten years to 2022/23, the capital works pipeline has expanded from around 150 projects involving Commonwealth funding of just over $20 billion to around 800 projects involving Commonwealth funding of almost $100 billion (see chart).
The outcome of the review follows an earlier announcement this week that the Commonwealth would reduce its share of the funding commitment on nationally significant projects from 80/20 to 50/50.
Infrastructure project pipeline growth
Speaking to reporters on Thursday, King said the measures were necessary in order to ensure that the infrastructure pipeline can be delivered.
She blamed the need for project cuts on the previous Coalition Government.
“The inescapable truth is that the previous government under the Liberals and Nationals failed to manage this incredibly important program during their decade,” King said.
“At best, the last decade is a case study of what governments should not do. Under the Liberals and Nationals, the number of projects increased from nearly 150 to over 800, not in and of itself a problem, but when you start to look at the what, it does become an issue.
“Many projects lacked proper planning, didn’t have informed costings and weren’t ready for Commonwealth investment.
“Worse, it is clear that the previous government deliberately set about announcing projects that did not have enough funding and they knew could not be delivered. It can only be described, frankly, as economic vandalism.
“After considered consultation with the states and territories – not always agreement, but considered consultation – we now have a forward plan of projects that the Commonwealth wishes to partner with the states to deliver.”
The review has been subject to criticism however, as it is not clear how the projects for funding cancellation have been selected.
Furthermore, the move to cut projects has drawn ire from some state premiers.
Queensland Premier Anastacia Palaszczuk said the cuts to projects in her state were ‘outrageous’ and said that the review did not have the Queensland Government’s cooperation as implied by King in her announcement.
Infrastructure Partnerships Australia Chief Executive Officer Adrian Dwyer said the outcome of the review provided welcome clarity but raised new questions about how critical infrastructure would be funded.
“The Government has delivered much needed clarity for the infrastructure sector to get back on track, identifying the projects and programs it will prioritise over the next decade,” Dwyer said.
“Reviewing the program was always a prudent move, and the Government has rightly concluded that the core aspects are vital to meet Australia’s economic aspirations and population growth demands.
“This announcement answers some important questions on the pipeline, but it also poses new questions that will need answering.
“Australia has enviable population growth and unmet demand for infrastructure. That’s a high-quality problem to have, but it’s a problem nonetheless.
“You need to build the infrastructure for the economy you want, not the one you’ve got.
“Where a project remains necessary, but the Commonwealth will no longer contribute to delivery, that leaves an unmet demand on state dollars.
“Australia’s states and territories have acute fiscal constraints and severely limited capacity to raise revenue – in short, they don’t have the big wallets, but they do have big responsibilities.
“If the practical effect is to transfer an ever-greater share of necessary infrastructure funding demand to the level of government that can least afford to pay, then the net outcome is less infrastructure.
“It seems counterintuitive to move the funding balance to the level of government least able to bear that cost.
“Ultimately, taxpayers care little which pot of their money investment comes from – but they care greatly that they have high quality infrastructure.”
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