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Victoria's three biggest transport projects will cost taxpayers up to $16.4 billion more to build than what the Andrews government originally said they would.
The multibillion-dollar revisions to the cost of the three projects have pushed the price tag for the government's transport infrastructure agenda above $45 billion.
The government said last week it will spend up to $16.5 billion building the North East Link, easily the most expensive project in the state's history and far above what it initially said the road would cost.
Premier Daniel Andrews said when he promised to build the long-anticipated "missing link" in Melbourne's ring road in April that the project would cost between $5 billion and $10 billion.
The route of North East Link. Photo: Supplied
The government's biggest public transport project, the Metro rail tunnel, is budgeted at $11.03 billion.
When Labor promised from opposition to build the nine-kilometre twin tunnel between South Yarra and South Kensington it estimated the project would cost $9 billion.
Its signature project – the removal of 50 level crossings across Melbourne – had an initial cost estimate of $5 billion to $6 billion.
This has since risen to $7.9 billion, including $1 billion in extras such as new stations, cycling and walking paths under a "metropolitan network modernisation program".
In all, the three mega-projects are currently projected to cost about $35.4 billion, after being pledged with an initial price tag of between $19 billion and $25 billion.
Premier Daniel Andrews toured City Square as a consortium led by Lendlease won the bidding process to build the Metro Rail tunnel. Photo: Darrian Traynor
Grattan Institute Transport Program Director Marion Terrill said the cost overruns were in keeping with regular government failures in Australia to keep major transport projects under control.
"It's an absolute classic of the genre, which is once there's a commitment [by government] to do something they'll go ahead regardless and the numbers bear no real relationship," Ms Terrill said.
The Grattan Institute has released a report arguing governments should hold off on making big transport promises until a business case has been completed that confirms a project's cost and its benefit-cost ratio.
Ms Terrill said that the North East Link appeared to be a good project for improving productivity and cutting congestion, but the government should make sure it is financially positive before committing to spend such a vast amount of taxpayers' money.
"It would be better for the citizens of Victoria if the state government did a business case and then sought a Commonwealth contribution by going through the Infrastructure Australia assessment process," Ms Terrill said.
Shadow minister for cost of living Ryan Smith said the government didn't appear to care that taxpayers would ultimately pay the difference.
"These cost blowouts on Labor's projects are measured in the billions, and could pay for any number of essential services that are being overlooked because Labor can't get its sums right," Mr Smith said.
Mr Andrews promised in April that the government would build the North East Link if it wins the 2018 state election.
He said at the time it would cost $5 billion to $10 billion, based on advice from Infrastructure Victoria. In August, Mr Andrews predicted the road would cost "around $10 billion".
Infrastructure Victoria found the benefits of the toll road would outweigh the costs but this assessment was based on the estimated cost of up to $10 billion.
A final cost estimate for the road has not been made, but Mr Andrews insisted last week that the road would have a positive benefit-cost ratio.
"We are absolutely confident that this project will have a positive benefit-cost ratio," Mr Andrews said. "Not spend a dollar and lose 55 cents. This will be spend a dollar and get at least that much back in benefit, potentially more."
One of the chief justifications of Labor's decision to kill the East West Link was its negative benefit-cost ratio of 0.45, meaning the project would have returned just 45 cents for every dollar spent on it.
Fairfax Media asked Mr Andrews' office how he knew the North East Link would have a positive benefit-cost ratio, but received no answer to the question.
Roads Minister Luke Donnellan said the North East Link would be the longest road tunnel in the state, travelling deep beneath the Yarra River.
"As part of the project we'll double the capacity of the Eastern Freeway, removing dozens of bottlenecks and we'll build the long awaited Doncaster Busway," Mr Donnellan said.
"The chosen route will cost more because it's been designed to protect homes and sensitive parkland and to deliver even greater benefits to drivers and public transport passengers."
In parliament on Tuesday, in response to questions by the Opposition, Mr Donnellan said the government was "going through the process of developing a business case".
"We believe this project is a winner," he said.
North East Link Authority chief executive Duncan Elliott said the $16.5 billion cost was an early estimate and the final cost would be determined in the business case.
"The direct build cost in today's dollars would be far less but for transparency and budgeting purposes the final costs to be confirmed in the business case need to reflect whole-of-project costs out to project completion," Mr Elliott said.
This article first appeared on www.theage.com.au
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