The PM’s high-speed gamble: The world’s longest rail tunnel or deepest money pit

Australians have been waiting a long time for a high-speed train to glide into their local station.

Since the mid-1980s, when a $2.5 billion very fast train linking Sydney, Canberra and Melbourne was first proposed, supporters of an east coast network of speeding locomotives have dreamt. And been disappointed.

Yet, the release this week of a business case for a high-speed line between Sydney and Newcastle, and a commitment of $660 million towards planning the project, has brought the concept so close you can almost hear the conductor’s call of “all aboard”.

But immense engineering and financial challenges lie ahead for a project that critics warn will inevitably cost far more than expected, take far longer to build than hoped, and fail to deliver the economic benefits spruiked by proponents.

Unlike past proposals, the scope of the initial plan unveiled this week is relatively modest. Australia’s first high-speed trains would run on a specially built 194-kilometre track with stations at Newcastle, Lake Macquarie, the Central Coast and central Sydney. It would then extend to Parramatta before ending at the soon-to-be-opened Western Sydney Airport.

Almost 60 per cent of the line would need to be built underground, including a 65-kilometre stretch that would extend further than the Gotthard Base Tunnel under the Swiss Alps – for now the world’s longest rail tunnel at 57 kilometres.

If completed, a Newcastle-Sydney trip that takes more than 2½ hours today would be sliced to 60 minutes as trains race along at 320km/h.

The best that could be said for previous attempts to build high-speed rail is that they attracted modest federal political support. Not this one.

Prime Minister Anthony Albanese wears his love of high-speed rail on his sleeve, declaring this week that it “absolutely makes sense”, citing the role it would play in economic development along its route while taking pressure off existing infrastructure such as the M1 motorway. He argues it will unlock housing, deliver thousands of jobs and generate tens of billions of dollars in economic activity.

While a final decision on the project has yet to be made, the prime minister’s mind appears to be made up.

“I accept that I will not be the prime minister when high-speed rail is finished. But I am determined to be the prime minister who starts it,” he declared on Wednesday.

Not only does the country have a high-speed rail nerd as its leader, but his emphatic 2025 election victory gives him a generational chance to get the project under way to a point that a future government would find it politically impossible to undo.

Albanese this week revealed he has raised the line, estimated at this stage to cost $93 billion, with the private sector, noting that Japanese companies are “very interested in playing a role”.

He is unlikely to be prime minister when the final bill for the project is known. The recent financial history of high-speed rail in other parts of the world suggests it could be horrendous.

Britain’s 225-kilometre “HS2”, linking London to Birmingham, is years behind schedule despite the scope of the project being scaled back to deal with a cost overrun of at least 100 per cent. The latest expected price tag is about $200 billion.

In California, a combination of terrible planning, construction through properties held by some of the most litigious people in the world, and Donald Trump’s hostility towards the state’s governor mean a high-speed rail line linking San Francisco and Los Angeles is even further behind schedule and more over budget than HS2.

There is a global industry around mega-projects and their cost blowouts. Alexander Budzier, who heads Oxford Global Projects in Britain, says the business case for the Sydney-Newcastle link appears “wildly optimistic”.

Australia would have to defy worldwide experience if it were to come in on time and on budget.

“We have studied more than 20,000 projects globally including high-speed and conventional rail,” he said.

“We see in our data that three out four HSR projects have a cost overrun between final investment decision and actual start of operations. For most of them, costs go up by about 30 per cent. But there is a worst-case scenario where we see that one in 10 projects more than double the cost.

“And that is measured from the full and final business case; early project ideas have an even higher risk of overruns. One has to only look at California High-Speed Rail or HS2 to see what this means and how these projects, if they are not set up correctly, can turn into a large burden to the taxpayer.”

The British and American problems have clearly influenced the team behind the Sydney-Newcastle proposal. Their business case warns that a project of the scale and complexity they are considering “carries inherent cost overrun risks”.

What a cost overrun might mean was included in this week’s report. In a worst-case scenario, under which benefits are overestimated and costs underestimated by 20 per cent, the project is a net loss to the nation of between $20.8 billion and $32.8 billion.

High Speed Rail Authority chief executive Tim Parker readily accepts there is a track record of mega-projects, including those in Sydney and Melbourne, blowing their budgets.

“We’re taking quite a considered approach to actually get it right before we say to the government, actually it’s going to cost you this much. Part of this is no surprises,” he says.

Parker, a former senior bureaucrat at the agency overseeing Sydney’s metro rail projects, says modern building methods such as boosting off-site construction will significantly reduce the risk of cost blowouts.

“I’m a great reader of the Bent Flyvbjerg and Dan Gardner book about how big stuff gets built. And it’s very simple: plan slowly, deliver fast,” he says.

“Giving the time to really get the contractors to be engaged and involved in the process, rather than give them a fait accompli after you have a reference design, will actually give us real benefits in delivery and hopefully mitigate the risk of cost blowout.”

Lessons to be learnt from the UK’s high-speed rail project include not over-specifying the line’s performance, Parker says, citing HS2’s “incredibly high” 400km/h design speed for trains. Contracts there were also awarded before designs were agreed, removing incentives for contractors to optimise outcomes.

While its Coalition predecessors showed enthusiasm for high-speed rail before shelving plans in 2022, the state Labor government has been lukewarm.

After previously ruling out funding for the federal project, NSW Premier Chris Minns did not inspire confidence this week when he was asked if high-speed rail could become a reality. “It’s going to take a huge effort and a lot of money, but it could,” he said.

Urban planner Joe Langley, who was a specialist adviser on Sydney’s metro projects and involved in a 2013 high-speed rail study, says the Minns government’s stance borders on negligence.

“Regional areas that have been neglected due to what I would say is an imbalance in infrastructure investment … will continue to suffer,” says Langley, who set up an advocacy group for high-speed rail.

“The other thing is that it exacerbates the current issue that we’ve got with carbon emissions and traffic congestion in the urban areas when we continue to over-rely on one form of transport.”

Langley says the NSW government’s position on high-speed rail sends a poor signal to other states. “This is really a nation-building project. It’s not the sort of thing that you can break into pieces to get the full benefit from it.”

Parker, who knows the state government inside out from his long stint at Sydney Metro, is not surprised by its reluctance to build high-speed rail, citing its priority to complete mega-transport projects inherited from its predecessors.

“Now will be the time to work closely with the state to see what are the benefits of joint development with them, and then they may come back with some form of contribution to the project,” he says. “Certainly, the vast majority of the benefits of this project go to the state of NSW.”

Parker says the agency identified that there were opportunities for value capture, but it had not been included in the project’s funding model because any betterment tax or levy would have to be imposed by the state or councils.

“We haven’t banked anything like a value capture. We’re in quite a different position from [Melbourne’s] Suburban Rail Loop where a lot of their funding is from that type of mechanism,” he says.

Proponents argue a high-speed rail line will take population and house price pressure off Sydney as people find they can easily commute from Newcastle, the Central Coast and other areas along the corridor.

The business case modelling found the number of dwellings in Newcastle was expected to be 36 per cent, or 39,100, higher with the rail connection compared with the status quo. There would also be an extra 22,900 jobs in the steel city.

The western part of Lake Macquarie was predicted to experience a 68 per cent jump in homes, while to the east the increase was about 15 per cent. Maitland, Wyong and Gosford were expected to have big increases in housing due to the line.

But there’s almost no change in Sydney or Parramatta. A high-speed rail line is expected to be an incentive that woos prospective Sydney residents out of the city to places that may be cheaper or offer better lifestyle options – a finding that mirrors the experience of countries such as France as a result of expansive high-speed rail networks.

The project is based on forecasts that 35,000 trips between Newcastle and Sydney would be made every day. Another 19,000 would be to the Western Sydney Airport, with about 1000 trips forecast to be between Newcastle and the Central Coast.

The business case argues a new line will take pressure off the M1 motorway which, under the latest forecasts, is likely to become a near-car park by the middle of the century in areas around Hornsby, Gosford, Wyong and Morisset.

Without extra lanes on the M1, a Sydney-Newcastle trip is expected to grow by 15 minutes over coming decades (with even longer delays during heavy traffic periods such as Christmas and Easter).

Apart from delaying the need to spend more money on the M1, projects such as extending the metro rail line from Parramatta to Western Sydney Airport or the long-term outer Sydney orbital corridor could be pushed out.

Regardless, the purported benefits detailed in the business case have failed to convince sceptics.

Tom Forrest, the chief executive of developer lobby group Urban Taskforce, argues the start of Shinkansen-style train services is “decades away, if ever”.

“Australia suffers from having too small a population to justify the capital cost of a genuine high-spend rail network. Even our concentrated clusters of population are a very long way apart from each other,” says Forrest, an ex-transport bureaucrat and former state Labor staffer.

“This week’s high-speed train announcement keeps the flickering burner alive beneath the beaker of hope so precious to the small brigade of anorak-clad train-spotters.”

After decades of promises, the public remains deeply sceptical about high-speed rail.

Asked for his response to sceptics, Parker cites the expansion of Spain’s high-speed rail network over the past three decades, which now totals almost 4000 kilometres of track.

“They haven’t stopped – they keep building. France is adding to their high speed,” he says.

“We’re trying to introduce to Australia a tried and trusted product that will fundamentally change connectivity between our cities and the regions.”

When work started on the Sydney Opera House, the estimated cost was just $7 million. By the time Queen Elizabeth II opened it, the final bill for the transformational project had reached $102 million – one of the largest cost blowouts for a building in the world.

If benefit-cost ratios were the only determinant, the Opera House would not have been built. The same may be said for high-speed rail.

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