Is Daniel Andrews taking the wrong turn on East West?

Herlad Sun: Is Daniel Andrews taking the wrong turn on East West? Tom Elliot. 22 November 2014

If Labor wins government in the upcoming state election, Dan Andrews will likely backflip on his commitment to scrap the East West toll road. Abandoning this project will cost Victoria billions of dollars, and thousands of jobs, it cannot afford to lose.

I understand why East West Link arouses so much debate. To inner-city types well served by public transport, yet another big road will simply encourage more people to travel by car. More cars mean increased emissions, frequent traffic jams and lengthier commutes. How great life would be if sparkly, new, locally made Xtrapolis trains could ferry all of us to and from work each day.

For those who can’t afford stratospheric inner-suburban house prices, however, new roads represent vital infrastructure. Tradies who serve clients all over Melbourne have no choice but to carry their tools in utes and vans, which must be driven. Salespeople keen to show potential buyers their wares cannot lug samples on and off trams, trains and buses. And the lack of interconnection between freeways like the Eastern, the Tullamarine and the Ringroad shows the wisdom of linking transport arteries rather than forcing vehicles to rat-run through residential streets.

So depending on one’s point of view the proposed East West Link is either necessary for our city’s booming population, or a piece of outdated and expensive 20th-century infrastructure.

Accordingly, Victoria’s two major political parties have very different views on the project. The Coalition has already signed the deal for Stage One of the Tunnel and will press ahead with Stage Two if re-elected. In contrast, Labor leader Mr Andrews has vowed to rip up the East West contract and instead spend money on rail. But will he really carry out this threat?

Right now a Supreme Court action, funded by the Moreland and Yarra councils, hopes to prove that Planning Minister Matthew Guy incorrectly used his powers when approving the Link. Yet whether or not this challenge is successful, Mr Andrews has already declared the East West contract “ … not worth the paper it’s printed on”. In support of their leader, both deputy James Merlino and former housing minister Richard Wynne have stated publicly that under no circumstances will the Link proceed under a Labor government.

These statements by senior Opposition figures may seem unequivocal, but I doubt they’ll have the guts to write off a $6.8 billion contract. There are three main reasons for this.

First, walking away from signed deals is an expensive exercise.

Almost $2 billion of East West’s funding has already been provided by the Federal Government. Most of this sum already resides in the State Government’s general revenue account, and is the reason Victoria has a Budget in surplus rather than deficit.

If Dan Andrews becomes premier and proceeds to scrap the Link, Canberra will immediately demand repayment of its $2 billion.

In addition, the Lend Lease consortium contracted to build the tunnel will sue for damages, to the staggering tune of $500m to $1bn. These two payments will plunge the state Budget into deficit thus threatening Labor’s immediate spending plans (of which there appear to be a large number).

The second reason Mr Andrews may prove reluctant to scrap East West is jobs. Over its five-year life the project is estimated to create almost 4000 direct positions, plus additional work for suppliers and contractors. The large unions that bankroll the ALP will not react kindly if all this new employment disappears. Unlike Labor’s promised cross-town rail tunnel, which is years away, the East West Link is ready to roll now. A job in the hand is always worth two in the bush.

Finally, if Mr Andrews is sufficiently brave to void a contract entered into by the previous government, he’ll create a damaging reputation for “sovereign risk” in Victoria. When future administrations attempt to fund railway lines, build new ports or just borrow money for general expenditure, financiers will demand (and receive) higher compensation in case the next government changes its mind again. Once established, a bad sovereign reputation can be very hard to shake.

Like all voters, I hate it when politicians break key promises soon after elections. Such breaches of trust reduce people’s faith in the governmental process, and are the main reason we afford elected officials so little respect.

Unfortunately for Dan Andrews, the short-term political gain he’s made from opposing East West will translate into longer-term economic pain. Assuming Labor wins power without requiring the Greens’ support, early next year our new premier will announce the road tunnel must proceed — and then hope like hell we all blame Denis Napthine for this monumental backflip.

You heard it here first …


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