Victorian Government warned about the cost of infrastructure spending

ABC Victoria: Victorian Government warned about the cost of infrastructure spending. 5 May 2014

The Victoria Government is again being warned about its ability to afford and manage new infrastructure projects like the second stage of the East West Link.

The Government has repeatedly rejected claims that it does not have the money or the manpower to build projects like stage one and two of the East West Link, an airport rail link and the Metro rail project at the same time.

A report by the Grattan Institute has found an ever-increasing chunk of states’ future operating budgets are being chewed up by depreciation costs and interest payments for past infrastructure spending.

Grattan Institute chief executive, John Daley, says that puts budgets under pressure.

“It’s all very well to spend a lot of money on infrastructure, but you’ve got to work out how you are going to fund it over the longer term,” he said.

“Even if the project is productive, it’s not at all guaranteed that Government will collect as much money from it as it spent on it.

“Maybe it helps the economy, but it doesn’t necessarily help your budget.”

Chris Walton, the chief executive of Professionals Australia, which represents engineers, says the state is risking a big blow-out.

“If the private sector doesn’t have a sensible flow of projects, they won’t have the staffing, equipment and skill levels able to deliver all at once, guess what happens? Price goes up,” he said.

“You’re probably looking around a good chance of a 20 per cent blow-out.

“That is $200 million for every billion dollars you spend on infrastructure, if you don’t manage this well.”

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