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Andrews says full steam ahead for Melbourne Metro — but is it all hot air?

Crikey, 17 February 2015

As per his explicit election promise, Victoria’s new Premier, Daniel Andrews, yesterday announced the beginning of work on the revived Melbourne Metro rail tunnel originally proposed under the Brumby government. Design and engineering work on the twin nine-kilometre tunnels under the CBD was well advanced in 2010 when the Brumby government lost office. Further preparatory work continued for a period under the Baillieu/Napthine government, but the project was eventually amended to follow a different route and renamed the Melbourne Rail Link.

The CBD tunnel is a very important project for Melbourne because limited rail
capacity in the city centre is a key constraint on the capacity of the
metropolitan-wide rail system. It’s primarily about making the existing network
operate better, rather than extending coverage or promoting urban renewal.

Demonstrating that too much hype is never enough in politics, the Premier
said the project would give Melbourne a public transport network “equal to those
in cities such as New York, London, Paris and Hong Kong”. Not to be outdone,
Transport Minister Jacinta Allan said: “If we don’t build Melbourne Metro Rail
now, our public transport system will grind to a halt.”

While those claims are just silly, there are a number of important issues to
think about regarding the Melbourne Metro:

  • Notwithstanding yesterday’s announcement, the Andrews government won’t make
    a substantial start on the project for at least four years. It’s allocated just
    $300 million this term for the $9 billion to $11 billion project. Yesterday’s
    commitment only provides $40 million to set up a new Metro Rail Authority and do
    more design and investigation. Tellingly, the Premier says the business case still has to be written;
  • Funding for the project hasn’t been secured. Andrews only promised before
    the election to “commit one-third of the construction cost of Melbourne Metro
    Rail” directly from government revenue;
  • Andrews' promise was conditional on the Commonwealth contributing one third
    of the cost, even though the Prime Minister has said he won’t fund urban rail. A
    new PM or a new government in Canberra might take a different view, but that
    can’t be taken as a foregone conclusion;
  • Andrews also promised from opposition that a third of the cost will come
    from the private sector. That looks straightforward, but it could be complicated
    if investors are concerned about how the government handles the cancellation of
    the East West Link contract (e.g. investors might require a higher return);
  • The ultimate cost of the project is unclear at this stage and might
    increase. It was $9 billion when it was submitted to Infrastructure Australia,
    but that was some years ago; costs usually increase with more detailed
    investigations. The Napthine government put the cost at up to $11 billion;
  • There are already pressures to expand the scope of the project and hence
    increase costs. For example, Stonnington Council is calling for a station at South Yarra. That option might seem eminently
    sensible, but was originally excluded because it would be difficult to retrofit
    a station in that location. It could add as much as $1 billion to the total cost
    without a commensurate increase in benefits;
  • If the total cost increases, the benefit-cost ratio for the project will
    deteriorate, all other things being equal. Calculated according to
    Infrastructure Australia’s rules, the BCR was 1.2 at a cost of $9 billion, but
    at $11 billion (or more) the BCR will break even (or possibly move into the
  • The business case for the Metro already exists and was submitted to
    Infrastructure Australia. It wasn’t made public. Now that it has released the
    business case documents for the East West Link, the Andrews government needs to
    be totally transparent about how it’s managing this project; existing and new
    documents should be public; and
  • It won’t be surprising if the reboot of Melbourne Metro leads to some
    changes to the proposal as it currently stands (e.g. to the alignment or the
    stations). That would partly reflect new information and new expertise, but I’d
    expect cost issues to be a big factor. Change will also provide a convenient
    excuse for the delay in starting construction.

In strictly engineering terms, the Andrews government could make a
substantial start on the project in this current (four-year) term, provided it
sticks to the current design. A lot of the engineering work was done under the
Brumby and Baillieu/Napthine governments.

The various approvals required might routinely take up to two years, but as
the Napthine government’s handling of the East West Link showed, this process
can be accelerated if the will and enthusiasm is there.

The problem for Andrews is finding the money. His task will be even harder if
the sale/lease of the Port of Melbourne doesn’t realise all the funds needed for
the government’s signature level-crossing removal program, or if the cost of cancelling
the East West Link contract is as high as many expect.

The upshot is it’s unlikely construction of the Metro will get underway in a
meaningful sense until the government’s second term (i.e. 2018-2022). That would
most likely see completion of the tunnel sometime in 2026-30.

If the electorate’s apparent preparedness to throw out governments after one
term continues, the result could be Melbourne Metro never starts. It would be
terrific to see a bipartisan approach. However, that seems a tall order because
this is one of those projects where the opposition has a distinct alternative
solution to the same problem (i.e. it has Melbourne Rail Link).

This is a big and strategic investment, so I’d like to see the government
also assess other possible solutions for expanding rail capacity (including the
Melbourne Rail Link) and take account of the best of all of them. But I
recognise the Metro is an explicit election promise.

The key political imperative for Andrews is to find the money and get
digging. The pressure needs to be maintained on the federal government. He
should also give serious consideration to requiring those who will benefit from
the project to contribute to the cost; the most prospective candidates are city
centre businesses and organisations.