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Private investors would be unlikely to fund the federal government’s proposed $8.3 billion inland rail project because it would not meet normal commercial benchmarks, the Department of Infrastructure has admitted.
With construction on the inland rail link between Brisbane and Melbourne due to begin this year, department officials told a Senate estimates hearing the project would not generate the rate of return on investment needed to attract private capital.
“In the absence of the (Australian Rail Track Corporation), it is very difficult to see that anyone would be investing in interstate rail network,” Department of Infrastructure head Mike Mrdak said. “Only government has the resources and, effectively, the patient equity to invest in long-term assets like this.
“The private sector ... finds it hard to generate the rates of return on rail track for purely private sector investment.”
Mr Mrdak said the anticipated rate of return on the public’s $8.3bn equity was about 5 to 5.5 per cent, compared with the 11 to 13 per cent that private investors expected from greenfield projects.
Richard Wood, the department’s general manager for inland rail, said project work was already under way but a start on greenfield sections would be at least two years away because of environmental assessments.
ARTC managing director John Fullerton confirmed the project’s current funding would see it end at Acacia Ridge — 38km short of the Port of Brisbane. Labor’s infrastructure spokesman Anthony Albanese said that was evidence the project was not properly planned.
“With a project of this scale, it is critical that we get the planning right,” he said.
This article first appeared on www.theaustralian.com.au
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