From The AgeFunds may be uncertain, but the need to proceed is definite
December 9, 2008JOHN Brumby's $38 billion plan to redesign Victoria's transport system depends on Federal Government money that is unbudgeted, uncertain and — as far as the public knows — uncommitted.
Delivering the much-awaited plan yesterday, Brumby said he would need $13 billion from the Federal Government over 12 years to clear Melbourne's streets, link the city's major road arteries and boost capacity on the state's rail system.
The figure includes $2.8 billion in money already promised by the Commonwealth and an additional $10.2 billion in money hoped for from Prime Minister Kevin Rudd's Building Australia Fund.
It is not the first time the $10 billion figure has been floated, and it is a figure that comes with some controversy.
The state has been pressuring the Commonwealth for a commitment of at least $10 billion since federal Treasurer Wayne Swan publicly questioned whether the global financial crisis would allow the Government to deliver on its promise of $40 billion to invest in transport, health and education.
The issue came to a head in the lead-up to last month's meeting of the Council of Australian Governments in Canberra.
Yesterday, federal Infrastructure Minister Anthony Albanese would not guarantee the money but Brumby spoke like a man who had been given a wink and a nod.
"I have seen a lot of the Prime Minister in recent times," Brumby said. "I believe that we are as well placed as we could possibly be in terms of funding for this program."
The State Government will pitch $25 billion into the mix, with $180 million in additional spending this year alone.
Nevertheless, Brumby said Victoria could deliver the plan without taking on too much debt or running the state into deficit.
"Our surplus is fine," Brumby said yesterday.
The promise of 10,000 jobs created every year over the life of the plan should help, as every job brings more money to the state's coffers through payroll tax
Victoria is already believed to have between $3 billion and $5 billion unallocated and available for the plan, and Brumby said the state would be ready to borrow to pay for its share.
Over the life of the project, the Victorian Government will spend about $12.3 billion of its own money on new trams, new trains and train stations, improved suburban and regional roads, new bus services, new bicycle paths and a slough of other, smaller projects.
But the big-ticket items — the $4 billion rail link from West Werribee to Southern Cross, the $2.5 billion road alternative to the West Gate Bridge, the $4.5 billion rail tunnel, the $1.3 billion Melton rail upgrade and the $6 billion link between the Metropolitan Ring Road and the Eastern Freeway — all rely on the Commonwealth sharing the burden with the state.
RACV's general manager of public policy, Brian Negus, said that, even if the feds failed to come through quickly, the state must ensure the projects proceeded — and should look to tolls to make up the difference if necessary.
"We are looking to the State Government to make solid commitments to this plan," Negus said. "If the Federal Government does not come good with funding, we don't think that is an excuse for the State Government not to get on with delivery."
But going ahead with such projects with less federal money than demanded would require substantial private partnerships, and such projects are hard to sell, with investors spooked by the global financial crisis.
The stress on investors in major projects is made obvious in the transport plan by the gaping absence of Sir Rod Eddington's road tunnel from the Eastern Freeway to the western suburbs.
About half the tunnel proposed by Eddington is covered by roads linking the port to West Footscray and, later, to the Western Ring Road.
Both of these projects will take precedence over a final toll road between the port and the Eastern Freeway, seen as a major project to relieve congestion on Alexandra Parade and Hoddle Street.
Brumby said there were too many comparable infrastructure assets on sale around the world that would compete for private money in the slowing economy to make the entire Eddington tunnel feasible now.
"It's such a huge project," Brumby said of the road tunnel across the city. "In the current environment, that would be a difficult project to undertake."
He said other projects in the transport plan would do more to ease congestion at the end of the Eastern Freeway, including a $5 million investigation into flyovers or underpasses at intersections on Hoddle Street and $360 million for an upgraded bus service from Doncaster to the city's centre.
As if to underline Brumby's caution over the toll tunnel, ratings agency Moody's yesterday said the company that operates Sydney's Lane Cove Tunnel, one of a number of struggling toll road tunnel projects around the country, was creeping nearer to default on its debt.
Nevertheless, the Victorian Government suggested a road tunnel from the Eastern Freeway to the Metropolitan Ring Road could be built as a toll road with substantial private money.
Ernst & Young specialist Darren Grimsey said the model of public-private partnership that had been developed in Victoria was broken, but different models were being developed around the world that could allay investors' concerns.
In Europe, for example, governments are guaranteeing some of the investment of their private-sector partners against the risk that projects were not used as much as expected.
Grimsey said private investors were still sceptical about major road projects paid for through traditional public-private partnerships, but Infrastructure Partnerships Australia executive director Brendan Lyon said the state's losses would increase the longer major projects were delayed by the global crisis.
"Australia faces long-term infrastructure challenges," Lyon said. "No matter how bad it is, the global financial crisis will be a short-term phenomenon. The Victorian Government is right to get on with the job of planning key infrastructure now to address current and future challenges."