Coalition and ALP share the road to project blow-outs

by Marion Terrill and James Ha

Published by the Australian Financial Review, Wednesday 20 March

Labor has made stadiums the focus of the NSW election campaign, promising to scrap $1.5 billion of rebuilding and upgrades if it wins on Saturday. But follow the money and you’ll find transport is the real battleground issue. As of last week, the Coalition had committed to transport projects worth $69 billion; Labor, $50 billion.

These are big commitments, but they’re not as astronomical as the commitments in last year’s Victorian election, where Labor, the Coalition and the Greens collectively promised $170 billion in transport infrastructure. And NSW’s parties are much better at agreeing on what needs to be built. But both sides are still ignoring much of the advice of Australia’s independent infrastructure bodies.

The NSW election has revealed a surprising level of bipartisanship between Labor and the Coalition on transport. In Victoria, the major parties had very different visions for the capital city. Labor foresaw an ever-larger Melbourne connected by a giant $50 billion rail loop; the Coalition dreamt of creating commuter cities where regional residents rode on a $19 billion fast-train network to the capital each day. The two parties had ‘only’ $30 billion worth of projects in common; most of their promises were unilateral.

NSW presents a different story. The two parties have a shared vision for Sydney as a city with three major centres: the CBD to the east, Parramatta in the west, and a new international airport near Badgerys Creek. Both parties agree on the need to connect these centres, and prefer to do so with heavy rail. Most of the promised transport infrastructure – $42 billion worth – receives support from both sides. The notable exception is Labor’s opposition to more motorways, such as the Western Harbour Tunnel, Beaches Link and the F6.

This level of bipartisanship is commendable. NSW voters should be glad their leaders have broadly similar views on city-shaping infrastructure. But the two parties feel the need to differentiate themselves; where they agree on a project, they disagree on how soon it should be delivered.

Spending arms race

This has led to a spending arms race. Take the promise of Metro West, a new rail line between Parramatta and the CBD. The Coalition initially budgeted $3 billion for the project, with construction to start by 2021. Labor then vowed to ‘fast-track’ it, upping the state commitment to $5 billion and hoping for a further $3 billion in Commonwealth funding if Labor wins the federal election later this year. The Berejiklian government then decided to ‘accelerate’ the project, raising the state’s commitment to $6.4 billion over four years and promising construction would start next year.

Keep in mind: this project still lacks a business case. Its total cost has risen from an estimated $10 billion at first announcement in 2016 to $16 billion in a tweet from Transport Minister Andrew Constance last year, and then to $18 billion in leaked Transport for NSW documents.

This is unsurprising; Grattan Institute research shows projects announced prematurely are likely to cost far more than the original estimate. And for mega projects like Metro West, there’s significant risk of cost overruns during construction – a 10 per cent increase in project size is associated with a 6 per cent increase in the likelihood of a cost overrun.

No independent infrastructure advisory body has evaluated Metro West’s costs and benefits yet. The parties believe the project will be popular with voters in western Sydney, but those voters have no idea whether it’s a good use of taxpayer funds.

Population perception

There’s a media-driven perception that NSW has an infrastructure deficit because of its fast population growth. Voters might think any new project must be worthwhile if it helps the state catch up. But spending on a poorly chosen project means not spending on a worthwhile one.

And growing cities need less new infrastructure than you might think. It may be intuitive that if population is growing at 2 per cent annually, 2 per cent more infrastructure is needed each year. But that’s not the case. Residents of Melbourne and Brisbane have similar commute times, despite Melbourne having twice the population but only 10 per cent more road space.

Ahead of the NSW election this Saturday, it’s a relief to see more sensible transport spending figures and more bipartisanship compared to the Victorian election last year. But only 19 per cent of the NSW Coalition’s promised spend is on projects with a business case assessed by an independent infrastructure body; for Labor, it’s only 23 per cent.

For all their talk about good economic management, both sides are asking voters to make risky decisions on transport.