The Age: State budget to ramp up plans for Metro rail project. April 29, 2014. Josh Gordon State political editor for The Age.
Victorian Treasurer Michael O’Brien. Photo: Jason South
The Napthine government is set to ramp up plans for a metro rail tunnel in a major public transport budget pitch potentially funded by proceeds from the sale of the Port of Melbourne.
In an interview ahead of next Tuesday’s state budget, Treasurer Michael O’Brien has also revealed Victoria is in discussions with the Abbott government over a radical plan to help fund the second stage of the East West Link using cheap loans from the Commonwealth provided to private sector construction companies.
Mr O’Brien warned Victoria had reached the limits of its ability to take on new debt, and had been in talks with the Commonwealth about funding major projects without jeopardising the state’s coveted AAA credit rating.
”We are not interested in carrying any extra debt on our state books,” Mr O’Brien told Fairfax Media. ”We are exploring whether there can there be a vehicle where Commonwealth loans could support a public-private partnership in such a way that it doesn’t hit the state’s book but reduces financing costs on a project.”
Under the plan – still being thrashed out with federal Assistant Infrastructure Minister Jamie Briggs – a private operator responsible for constructing the road would have access to the Commonwealth’s low borrowing costs, with the loan likely to be offset by future toll revenue.
Mr O’Brien, who is still finalising his second budget, has also signalled the state government will be using the budget to bring forward the long-awaited metro rail project to boost the capacity of Melbourne’s urban rail network.
Prime Minister Tony Abbott has previously made it clear the Commonwealth will not be funding urban rail projects. But the federal government has also announced plans for bonus payments to states who sell assets and reinvest the money in new infrastructure.
Under the scheme, states would get payments worth 15 per cent of the value of the asset they sell, potentially providing extra cash for state urban rail projects, despite Mr Abbott’s refusal to offer direct funding.
It is believed the metro project – which is being ”realigned” – and other rail announcements could benefit. It remains unclear how much the sale of the Port of Melbourne will make, but the figure is expected to be substantial. If the port were sold for $6 billion, Victoria would have an extra $900 million under the Commonwealth scheme to use on rail projects.
”We will be providing an update in this budget on whether we think there is a way to responsibly bring this (the metro rail project) forward,” Mr O’Brien said. ”It is not easy with a project of this size and scale but if we think there is an opportunity to responsibly bring it forward a bit then that’s what we’ll seek to do.”
The budget is also expected to predict solid surpluses over the next four years, with State Treasury expecting the economy and the jobs market to remain surprisingly resilient despite national headwinds. Strong housing activity is also likely to result in upgrades to stamp duty collections.
Victoria has been concerned that a brutal federal budget a week after the state budget could hurt the state economy.
But Mr O’Brien said his federal counterpart had reassured him economic growth would not be stifled.
”From my discussion with Joe Hockey I know that the federal government is as concerned as we are about making sure economic growth is encouraged,” he said. ”We know that the investment phase of the mining boom is coming off. We know that there needs to be other drivers of economic growth to make up for that. That’s why the federal government we have been so pleased to see has been encouraging us on infrastructure.”