The Age: East-west link would not return state costs. February 13, 2014. Josh Gordon
Further doubts have emerged about the economic case for the east-west link, with the Napthine government’s secret business case revealing the benefits to Victoria could be overshadowed by the cost of building and operating the road.
The state government’s own estimates show Victoria could recoup a loss-making 80¢ for every $1 spent on the project if so-called ”wider economic benefits” are excluded from the analysis.
Although the government has long said that the benefits of the $6 billion-to-$8 billion tunnel far outweigh the costs, it has refused to provide details, insisting the project will produce a return of $1.40 for every $1 spent.
But The Age can reveal this represents a best-case scenario, relying heavily on a controversial branch of analysis known as ”agglomeration economics”, which holds that increased urban density linked to transport projects adds to business productivity.
Infrastructure Australia head Michael Deegan told a Senate committee that the government’s unpublished business case also provided an alternative estimate, showing a benefit-cost ratio of 0.8 when ”wider economic benefits are not included”.
Under this scenario the project would return just 80¢ for every $1 spent, suggesting an economic loss if the ”stock-standard” analysis preferred by Infrastructure Australia is used.
In a robust response, state Treasurer Michael O’Brien said the project would create 3200 jobs and it was entirely appropriate to consider wider economic benefits when assessing it.
”Tunnelling is an undoubtedly more expensive way of delivering this project but the alternative – creating a freeway at grade – would devastate Royal Park, the Melbourne General Cemetery as well as hundreds of additional properties including schools,” Mr O’Brien said.
”The lived experience of Victorians has been that major transport projects such as CityLink, EastLink and the Western Ring Road have led to significant wider economic benefits for business and the broader community that should be taken into account in assessing the value of these projects. It is no different for the east-west link”.
In a submission to a federal infrastructure inquiry, Infrastructure Australia targeted Victoria for failing to submit a ”robust” business case for the east-west link, singling the project out as an example of why the public are cynical about ”big ticket” infrastructure announcements.
Infrastructure Australia’s 11-member council – which includes transport expert Sir Rod Eddington and federal Treasury secretary Martin Parkinson – is understood to broadly recommend only those projects with benefit-cost ratios of more than 1.5.
A June 2012 study by Victoria’s Transport Department said the costs and benefits of transport go well beyond the direct user. It said businesses become more productive when urban density increases, but conceded that in Australia ”robust data” is not available to make an accurate financial assessment.
Opposition transport spokeswoman Jill Hennessy accused Premier Denis Napthine of inflating the benefits of the project, while failing to invest in public transport.
“Instead of meaningful investment in public transport, Denis Napthine’s only priority is spending $8 billion on a dud road tunnel that won’t do much,” she said.
University of Melbourne planning professor Alan March said the evidence increasingly suggested the project did not add up, particularly after considering the opportunity costs.
”There are many other ways of spending money that would produce a much greater return for Melbourne, and public transport is one of them. This is wrong-headed.”