Calls to rethink Victoria’s most expensive road project during pandemic

The Andrews government faces calls to reconsider spending $16 billion on the most expensive road project ever built in Victoria, as the state braces for an economic slump caused by the COVID-19 pandemic.

Economists, transport experts and the Victorian opposition said it would be irresponsible to push on with the North East Link as if nothing had changed.

The Grattan Institute's transport and cities program director, Marion Terrill, said the government should re-examine the business case, and reconsider the road’s scope in light of a likely slump in population growth. She said 300,000 temporary visa holders had already left Australia this year, and that number could double by the end of 2020.

“Given the drop in population growth and significant budgetary constraints, it may well make sense to curtail the scope or the way the road is built, even if the decision to proceed still makes sense,” she said.

Treasurer Tim Pallas this week said the state would borrow up to $24.5 billion in emergency funding, which economists believe may take a generation to repay.

The government argues major projects will help the economy recover from a looming recession caused by the coronavirus response, with Premier Daniel Andrews promising this week that Victoria's transport building boom would only get bigger. "Construction will be a very big part of the recovery from the coronavirus crisis," he said.

Labor's largest project is the North East Link – a 26-kilometre tunnel and freeway expansion to improve freight links between the Metropolitan Ring Road in Greensborough and the Eastern Freeway.

In early 2018, a government business case estimated that every $1 spent building the toll road would deliver economic benefits of $1.30 for Victorians.

Victorian Transport Association chief executive Peter Anderson said the time was right to build the major freight link through Melbourne's north-east. “Transport is going to be more expensive in the future than we pay now, and we are going to have to borrow more money," he said.

But SGS economist Terry Rawnsley, who represented three councils at environmental hearings on the North East Link, has previously warned the project could become a "financial disaster" due to over-estimated travel time savings and traffic numbers.

The project was especially risky, he said, as the state government was carrying the financial liability of fewer cars using the road than it projected, by tolling the road itself, and because only one construction company had put in a compliant bid to build the project.

It made sense to link the Ring Road in Greensborough to the Eastern Freeway in Bulleen, Mr Rawnsley said, but builders and investors viewed tunnelling through a sensitive ecological area and the drastic widening of the Eastern Freeway – to more than 20 lanes in places – as risky.

“So much money is being poured into [widening] the Eastern Freeway, which has nothing to do with north-east linkages, so how did we end up with this design?”

Mr Rawnsley said it was wise to spend $16 billion on construction to stimulate the economy.

Economists and the Victorian opposition are questioning the wisdom of spending $16 billion on the North East Link amid the COVID-19 crisis.Credit:North East Link Authority

But rather than investing in mega-projects, the money would be better spent on housing or local road projects employing more people in total and spreading investment across the state. “The tunnel-boring machines don’t have a family to feed,” he said.

Opposition transport infrastructure spokesman David Davis said an updated cost-benefit analysis for the North East Link was “critical” in light of COVID-19.

The opposition supports construction of a major toll road in Melbourne’s north-east and Mr Davis said building infrastructure would help reboot the state's economy. But "taxpayers and toll payers deserve to know that the project’s value stacks up,” he said.

Transport Infrastructure Minister Jacinta Allan did not respond to questions submitted to her office on Friday about the possible impact of the COVID-19 crisis on the project. Instead, she issued a one-line statement, saying: “We promised to build this road, and we are a government that keeps our promises."

Planner Andrew Butt said a likely impact of the pandemic was an end to surging population growth. Melbourne has added 1 million residents since 2019 – almost the equivalent of a city the size of Adelaide.

RMIT’s Professor Butt said international migration would fall for economic reasons and because of intense political pressure “not to keep population growth so high during a period of high unemployment” in Australia.

He said a counterpoint to any argument to reconsider big transport projects in Melbourne was that many “are just playing catch-up with the growth we have seen”.

Urban policy professor Jago Dodson, also from RMIT, said the coronavirus would cause state revenue to collapse because of falling population growth and lower GST payments from Canberra. “That brings a lot of doubt to any major project.”

North East Link project chief executive Duncan Elliott said there was no change to the timeline, with major construction to start in 2021. “We are getting on with building this vital project for Victoria, just as we promised,” he said.

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