I spent some time last year planning a piece for a commercial media clients about the Melbourne Suburban Rail Loop, a planned underground rail tunnel through Melbourne’s eastern suburbs and then out, partly above-ground, to the west. I had to drop the piece when my client’s funding drained away under the pressure of COVID. At the time, my digging had produced a few pieces of the story, most of them not sufficiently confirmed to warrant publication.
Now three journalists from The Age, led by the persistent Timna Jacks, have published a long and detailed story about the project’s strange origins. It jibes with what I was told, while revealing much more detail than I could gather. My assessment is that it’s very well sourced. It’s good to see The Age pursuing this sort of journalism under editor Gay Alcorn. I really recommend you read it.
Poor bang for the buck
I’ve long been sceptical about the Loop, not just because it doesn’t match any of the work done on Melbourne’s transport needs over the past 30 years, but also simply because it seems to offer poor bang for the buck.
Often when I do a detailed investigation of a project, some of my initial scepticism subsides as I see new aspects of the problem it’s trying to solve.
In this case, my scepticism long ago turned to amazement that Victorian premier Daniel Andrews had tied himself to such an oddly-conceived project. More than once I sat back and wondered to myself: just what was he thinking?
But I was told off the record by three separate sources that Andrews “just loves it”. People who talked seemed mostly convinced that this enthusiasm, more than anything else, has driven the Melbourne Suburban Rail Loop.
Here’s an even odder governance issue: the Loop scheme was designed not in Victoria’s Transport Department, but in a government housing authority, Development Victoria. The tiny project team was led by a bright young former ALP staffer, Tom Considine, and a veteran ALP-connected business figure, James MacKenzie. This is why I described it above as “oddly-conceived”.
The project seems intended, like several schemes before it, to promote “precincts” or clusters of expertise at some distance from Melbourne’s CBD. That’s a potentially worthy aim. Our knowledge of how to create such precincts is thin, however, and government precinct-creation successes are rare. None of those uncertainties deterred Considine and MacKenzie.
Nor did cost. The initial price tag at the announcement was “up to $50 billion”. In truth, though, the commonest figure I heard in association with the project was “more than $100 billion”. Since academics studying the area tend to find that rail projects suffer greater cost blowouts than any other project type, this is not surprising. Project promoters intentionally underestimate the costs to muster the support of politicians.
In a 2014 book, Bent Flyvbjerg – one of the world’s best-known infrastructure project management experts – quoted a former San Francisco mayor, Willie Brown, on how this process usually goes:
In the world of civic projects, the first budget is really just a down payment. If people knew the real cost from the start, nothing would ever be approved. The idea is to get going. Start digging a hole and make it so big there’s no alternative to coming up with the money to fill it in.
“The cost blowout on that thing will be monumental,” said one person I spoke to. To my knowledge, Daniel Andrews no longer cites the $50 billion cost figure.
In other words, this is now potentially a $100 billion-plus project. And it has been conceived without real city-building expertise.
Short on city-building expertise
The project might still be worth considering, if the small team was making use of a deep pool of transport, urban and financial expertise and getting strong benefit-cost estimates. But they appear not to have had much such expertise on call.
What Victoria has right now is a scheme to bring the smallest possible number of people to what are so far relatively small middle-suburban precincts, using what seems a disproportionate amount of time and money, and without independent confirmation of the scheme’s merits. The project is not part of any integrated transport plan; as Jack’s fellow reporters Chip Le Grand and Paul Sakkal have reported elsewhere, the state has none. The government’s infrastructure assessment body, Infrastructure Victoria, appears to have been sidelined from any review of the project. There’s been no federal funding application yet that would trigger an Infrastructure Australia review. “It looks ridiculous, really,” one person familiar with the proposal told me.
It’s ridiculous not just on classical cost-benefit grounds, but also as a city-shaping initiative. If you really wanted to build up suburban business and knowledge precincts, you’d concentrate on delivering transport to them from the surrounding ten kilometres, using trams and buses and roads and cycleways. Instead, the government wants to build a huge underground railway which will have perhaps 15 stations along its 90-kilometre length, touching on two or three promising clusters of activity – notably Monash University – but also serving less knowledge-rich suburbs like Cheltenham, Heidelberg and Fawkner.
Now, somewhere in Melbourne, a team of people is trying to turn this idea into what the premier calls an “investment case”. It will require a huge amount of state government money, far above what passengers will pay to use it.
If you had $100 billion to develop Melbourne’s promising precincts, you could actually do quite a lot. But the Melbourne Suburban Rail Loop won’t do much of it. And it will mean borrowing a truly huge amount of money. Victoria’s annual gross state product is around $470 billion; the Suburban Rail Loop is likely to require at least a fifth of that.
Now that COVID-19 has blown a hole in the state’s finance, the whole mess looks even more unlikely to be completed. COVID actually gives Andrews the perfect opportunity to call it off. But he shows no signs of doing so. That task seems more likely to fall to a successor.