Consider delaying Melbourne Airport rail link, Infrastructure Australia advises

The federal and Victorian governments have been urged to consider delaying construction of the Melbourne Airport Rail project until there is enough passenger demand, and they are more confident of not blowing the $13 billion budget.

Federal advisory agency Infrastructure Australia also said the project needed to consult more with Melbourne Airport, which was blindsided by plans for an elevated “sky rail” station instead of its preferred option of an underground station.

The state and Commonwealth governments have each committed $5 billion for the long-awaited airport rail, which will start major construction next year and run from central Melbourne to the airport in 30 minutes when it opens in 2029.

But in an assessment of the rail link’s business case released on Monday, Infrastructure Australia found more work was needed before federal money was poured into the project, which has a budget of $8 billion to $13 billion.

“The strategic need for Melbourne Airport Rail is strong and there will be long-term benefits,” the assessment says.

“However ... we recommend further work is undertaken to improve certainty of the cost estimates, cost escalation risk, and outcomes of stakeholder engagement, particularly with Melbourne Airport.”

Developing the infrastructure to meet the needs of Victoria’s growing population is a top concern ahead of the November 26 state election, according to voters The Age spoke to for its Victoria’s Agenda series.

Infrastructure Australia – an independent government advisory body required to evaluate the merits of projects seeking $250 million or more in federal funds – previously backed Melbourne Airport Rail during its early stages.

But its latest assessment was to exclude it from its priority list, which identifies significant projects that would deliver the best value for taxpayers.

The assessment says there are strong reasons for progressing with the rail project, which would improve Victorians’ living standards by easing road congestion and delivering better travel options, health and environmental benefits.

But a key issue is that Melburnians will keep driving to the airport until the recently widened Tullamarine Freeway reaches capacity around 2036. That “undermines” the project’s short-term benefits and would result in low passenger volumes for the first 10 years of operation, the assessment says.

Delaying the project to align with the Tullamarine reaching gridlock, while also giving Victoria time to confirm its scope and building costs, would “reduce risk and maximise the return for taxpayers”, it says.

The Airport Rail is one of the flagship projects in the Andrews government’s infrastructure pipeline, which has ballooned to a record $184 billion. The state business case for the project, released on September 22, says it will deliver a positive economic return of $1.80 for every $1 invested.

But those benefits could be “significantly overstated”, Infrastructure Australia said, with its own assessment showing the project would lose 40¢ in every dollar invested.

“The economic benefits of Melbourne Airport Rail do not outweigh its economic costs at this time,” the assessment says.

Infrastructure Australia’s concerns echo those raised by the Victorian Auditor-General’s Office last month, which blasted the government for using generous “discount rates” and “wider economic benefits” to calculate the financial merits of its pet transport projects in business cases, which did not support “fully informed investment decisions”.

Infrastructure Australia also says the business case was limited because it only examined one solution for the project – a shared rail line with Metro services running from the CBD via Sunshine – and did not consider viable alternatives that may cost less.

On Sunday, Premier Daniel Andrews rebranded the Airport Rail project, consolidating it in his flagship Suburban Rail Loop. The government has pledged to build the contentious loop’s first $35 billion section, running from Cheltenham to Box Hill, while the opposition plans to ditch it and prioritise health spending.

An Andrews government spokesperson said: “Others have talked about a rail line to Melbourne Airport for decades – the Andrews Labor government will get on and deliver it.”

State Transport Infrastructure Minister Jacinta Allan and federal Infrastructure Minister Catherine King were contacted for comment.

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