YCAT Editorial – Fact Busters

With the East West link slowly sinking under its own weight, big business is pulling out all stops to try and save it. Treasurer Michael O’Brien said Labor’s position was “economically insane, and would cost Victoria $3 billion and 6200 jobs”.

Tony Abbot has promised $3 billion, some of it for stage 2, as part of his ‘stick to your knitting’ no trains policy. That funding can now be reassigned to higher priority and more productive projects such as the unfunded Melbourne Metro. So that’s hardly a cost, more of a gain.

The Treasurer also said no one would want to do business with a Labor government that was prepared to “rip up contracts and … go back on their word.” The contracts will be unenforceable, so there is no need to rip up anything, they can simply be set aside.

We are not going to be held hostage by Mr Andrews and his reckless behaviour, we are going to get on with negotiating the final stages of these contracts, signing the contracts and getting on with building the East West Link.”

Michael West in Fairfax Business Day, put it succinctly,

“This idea that you can stick an incoming government with an $8 billion bill just weeks before an election is a bit rich”. The government is recklessly trying to hold the next parliament hostage to contracts.

“Nobody should ever be required to commit $8 billion of other people’s money on a project that they know nothing about and which lacks community approval in any case. This would be truly reckless.”
Michael West, Business Day, September 12, 2014, p.32.

The Treasurer cannot guarantee he will win the court case, or the election. Signing contracts will expose Victorians to far more than the $12 million that unsuccessful bidders are entitled to. If Napthine signs, he would be putting political pride and tribal politics ahead of the best interests of the State. A prudent leader would wait for the outcome of the election and the court case before exposing Victoria to claims of extensive damages.

Referring to damages,

“A government source said this could leave Victoria with a bill as high as $1 billion.” Lend Lease have not commented, but financiers close to the project have said the consortium was unlikely to spend any money or start work on the project until the contract issue had played out in the courts.”

Infrastructure Partnerships CEO Brendan Lyon says

“Victorian’s taxpayers will be on the hook for hundreds of millions in compensation if the project is axed.”

This is still better than being $18 billion on the hook for useless infrastructure.

If the contract is not signed, then the damages claims would likely be less. Unsuccessful bidder John Holland was awarded $12 million.

Victorian Employers’ Chamber of Commerce and Industry chief executive Mark Stone said scrapping the project would be of “great detriment to Victoria. There is overwhelming support for this project among Victoria’s major business and motoring groups, including the RACV, and it is also supported by a number of key union organisations,” he said.

The best argument VECCI can muster is that rent seekers will lose their rent. They ignore the negative returns in the business case. Any project will create construction jobs for a while. But if the project is pointless, then it’s just welfare. Building detention centres on the bottom of the Yarra would create jobs – That doesn’t justify the project.

The same line is being run by the Committee for Melbourne’s Kate Roffey, who side-steps the issue of whether the project is a good investment “This is not the case of asking if this is the right project for the state – it is a question of the economic impact and the reputational damage we risk if we change projects at this late stage.”

Much better to change now before signing. If you are in a hole, you should stop digging. Roffey says the need for the road was settled by Eddington in 2008, forgetting that Melbourne Metro was Eddington’s number one priority. Metro had support of Infrastructure Australia who called it shovel ready, and it was to be funded by the previous federal government.

The Australian Industry Group is showing the same form. Victorian director Tip Piper says,

“Irrespective of the arguments for and against, these are contracts which a new government must support”. Sorry, what contracts? Is there something else they haven’t told us? Piper highlights the problem with infrastructure project selection. They don’t care about arguments for or against, big business just wants a cut of the action.

No commentators from the big end of town are seem to be at all concerned that the project’s merits have been found to be baseless. We must conclude that their own interests are being put ahead of Victoria’s interest.

The raison d’etre for the East-West link has always been a cunning plan to wedge the ALP and the Greens.

The Greens’ strategy has been to pressure Labor to say prior to the election that it would not honour the contracts. This shows rare integrity. The Greens may have gained more seats if Labor  had continued to give cover for the road. Even so, they realised this was the most effective strategy to kill the project and put Melbourne onto a more sustainable transport trajectory.

There is an urgent need to sever infrastructure project selection from the electoral cycle and petty party politics and the selfish needs of big business. In this Roffety agrees:

“If ever there was a case that demonstrates the need for long-term independent assessment  of major projects.  This is it.”

Kate Roffey,  Business Day, September 12, 2014, p.29.

Politicians on all sides of politics are guilty of rushing to announce large projects without sufficient planning, leading to “announcement remorse”,says the head of the Productivity Commission. Peter Harris, chairman of the independent government body, said federal and state governments were rushing in to announce big new investments without stopping to think about the benefits to the public, despite lessons learnt from major projects such as the National Broadband Network.

Kitty Flanagan as Rhonda and Rob Sitch as Tony in Utopia

Infrastructure Australia was a good start down this path, although the reality may have been closer to the Nation Building Authority. The last word has to go to Public Relations Manager Rhonda:

“The new highway, very exciting. The one that goes around, its not just a road, its a link, its the final link in the loop that brings it around and links the whole. That’s not the point. The point is what I’m hearing is there could be some sort of delay.  This could jeopoardise my launch. …I’ve got state and federal ministers penciled in, a national anthem to organise.”

Chris Goodman, for YCAT

One thought on “YCAT Editorial – Fact Busters”

  1. chrisg says:

    Crunchtime for the tunnel
    #EWL is marooned with no final design, no public business case, no approved tolls, no legislative backing, unmet planning conditions and widespread opposition. – Andrew Herrington

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