Stop North East Link Alliance

Letter to Federal Minister for Infrastructure

The Alliance opposes the North East Link Project (NELP) which in our view is a sub-optimal transport project with major adverse consequences. Far more beneficial and lower cost solutions are available to effectively acquit the transport task in the area which the project is purported to serve. NELP would in particular compel greater car dependency at a time when sustainable transport modes should be preferred. Such dependency, significantly elevates costs for individual households, and, foreseeably, greater consumption of fossil fuels.  The project would also have substantial adverse collateral effects, including for land use, urban amenity, the environment and human health.

As you will know, the NELP is on Infrastructure Australia’s priority list. In fact, NELP was assessed in October 2018 by Infrastructure Australia as a high priority project, with a positive benefit-cost ratio of 1.3 and a Net Present Value of $2,187 million.

Whether or not this assessment was then valid, the Stop North East Link Alliance submits that significantly changed circumstances since 2018 should lead the Commonwealth to reassess any commitment it has to the project. We set out below for your consideration what we believe to be some of the more significant questions about the viability of the project, and which should inform current and future government decisions.

Poor public transport in the project corridor

Firstly, the NELP proposal was developed in the absence of any comparative analysis of public transport solutions. Quite detailed reviews were undertaken by the Victorian Government of route bus services in Melbourne up until about 2008 but proposals in the project corridor that would have resulted in significant mode shift to public transport were never implemented under the Meeting Our Transport Challenges strategy which was released in 2006.

It was only in 2021, that the Victorian Government announced a sequel, Victoria’s Bus Plan. However, at $109 million, the proposed outlays foreshadowed through the plan are paltry, especially in comparison with the scale of funding proposed for the NELP and other roads projects.

As a consequence, there are serious questions which should be asked of the Victorian Government by the Commonwealth concerning its relative indifference towards potentially much less expensive and more effective public transport solutions in the corridor.

Transport behaviour and the COVID pandemic

Secondly, the impact on transport behaviour of the COVID pandemic should now be considered.

Expert evidence tendered in August 2019 on behalf of the Manningham, Whitehorse, Banyule and Boroondara Councils to the North East Link Project Inquiry and Advisory Committee indicated that even before the onset of the pandemic that the traffic volumes predicted by the North East Link Project were inflated.

We now see that commuter trips by office workers, in particular, have declined as a consequence of the pandemic. Whilst there has been some recovery, it would not be unreasonable to conclude that there may be a permanent change in behaviour which would see a reduction in longer commuter trips as workers work from home or at locations closer to home. This is of particular relevance for the NELP which, it had been anticipated, would carry a substantial number of longer commuter trips. These included trips destined for the Melbourne CBD, which has been particularly affected by changes in travel behaviour since the pandemic.

As a result, the major underlying concept of Melbourne 2030, of a polycentric Greater Melbourne has been given impetus, but not quite in the way imagined when the policy was released by the Victorian Government in 2002.

Suburban Rail Loop and duplicative infrastructure

The third concern is related to the Victorian government’s Suburban Rail Loop project (SRL). This project was announced by the Victorian Government on 28 August 2018, just a few weeks prior to the announcement by Infrastructure Australia that it would designate the NELP as a high priority project.

The SRL is an orbital urban rail passenger service anticipated to run from Cheltenham to Werribee via major activity centres including Box Hill, Heidelberg, Melbourne Airport and Sunshine. The project is strongly promoted by the Victorian Government as a means to create a polycentric Greater Melbourne, one no longer solely concentrated on the Melbourne CBD and served by a radial transport network. The Commonwealth recently made an initial funding commitment of $2.2 billion to the project.

The final cost of SRL, together with its anticipated call upon Commonwealth capital funding is unknown at this stage. The original Victorian Government estimate in the order of $50 billion for the project appears too low.

The major significance of the SRL for the purposes of NELP is that in its second phase (SRL North), the service would extend from Box Hill to Melbourne Airport and be largely duplicative of the route for NELP. It seems clear that Infrastructure Victoria would not have been in any position to take account of the impact of this project on the viability of the NELP. For this reason alone, we believe that the Commonwealth should task Infrastructure Australia with reviewing its assessment of the NELP.

Freight and NELP

The fourth issue concerns the weight that the Victorian Government assigns to road freight in justifying the increased road capacity the project would provide. In truth, though, most of the road space on the arterial road network in the corridor is taken by passenger cars where, for the most part, these vehicles have only one occupant, the driver. This is highly space inefficient. As discussed above, many of these trips would be capable of relocation to far more space efficient transport modes, and especially public transport. This would free up the road network for higher value heavy freight movements.

It is notable, though, that the proportion of all Victoria’s freight that is carried by rail is very low. The movement of containerized freight from the Port of Melbourne is especially low. This is a matter that now needs urgent attention, both by Victoria and the Commonwealth.

It also appears implicit in Victorian Government support for NELP that it believes it would enable the development of Hastings as the location for Victoria’s second container port. This has been an on again-off again proposition for some years now. However, Hastings would be a very unfavourable location for such a port, having regard for the land-based distribution task which would involve many locations within Victoria and interstate, but with relatively few of these destinations being in the south-east of Victoria. There are also major environmental considerations in Westernport Bay. Some of these issues played out in the lead-up to the refusal in March 2021 by the Victorian Government to permit the construction of a gas terminal near Hastings.

Uncertain project costs and the public account

The fifth issue, which is of particular concern in the uncertain economic times we now find ourselves in, concerns certainty in costs for the project and the potentially negative impact on the public account, both Commonwealth and State.

You will know that there have been concerns about cost escalation in other transport infrastructure projects in Victoria in recent years. The West Gate Tunnel project, for instance, a much more modest roads project than the NELP, was earlier estimated to cost $5.5 billion and would be completed next year. More recently, it has been estimated that the project may cost about $10 billion, and that it would not be completed until 2025.

Similarly, the cost of the Metro Tunnel rail project, initially anticipated to cost $11 billion, was reported in 2020 to have increased by $2.74 billion. These pressures would be exacerbated by the NELP. Serious attention needs to be given to the health of the public account, both federally and at state level. There is a significant overhang in public sector debt, largely as a consequence of the pandemic. This time, more than ever, is one for fiscal discipline by all levels of government, as cost pressures are certain to continue because of a number of factors, not the least of which are uncertainties associated with international supply chains, in some cases exacerbated by ongoing international conflict.

It is likely that there also cost overruns on Victoria’s level crossing removal projects. The total program cost was reported in 2020 to be $14.8 billion, but there is no reporting on the cost of individual projects, which have involved funding commitments as high as $670 million.

When announced in December 2016, the Victorian Government said the NELP was expected to cost up to $10 billion.  Then, in May 2018, it was indicated the project would cost $16.5 billion. Subsequently, in October 2021, the government announced that tunnelling for the project would extend for a further 1.9 kilometres. There has been no advice, as far as we are aware, of the effect of this announcement on anticipated project costs, but on the face of it appears likely to be significant.

In an appearance on 13 May 2022 before the Public Accounts and Estimates Committee of the Victorian Parliament, the Victorian Treasurer, The Hon. Tim Pallas, M.P., acknowledged that “commodity price rises, resourcing price rises, skill shortages and a lack of competition because of an overabundance of government activity around construction” were major factors in putting upward pressure on the cost of major government projects.

This observation follows in the wake of wider criticism by informed observers that “mega” projects, such as NELP, have often been far less cost effective than alternative initiatives that have addressed gaps in services, such as the potential, so far not explored, of improvements in route bus and other public transport services.

Self-evidently, there are also opportunity costs involved for governments, both Commonwealth and State. Housing, for instance, is a potentially large loser if overspending on major transport projects were to continue.

Environmental risks and costs

Finally, it should be borne in mind that a significant element of the cost over-run on the West Gate Tunnel project, the discovery of contaminated soil, and especially PFAS, may also become an issue with the NELP. It is unclear whether the assessment of the presence of contaminated soil is as thorough as it should have been. In addition, the changing climate patterns, a result of climate change, must enhance the risk of serious flooding in the medium to longer term.

It would appear that the risk of cost increases with the significantly larger NELP, recently announced, is high. As noted above, there remain uncertainties about the cost escalation in the build itself, as it is primarily a large tunnelling project in an environmentally sensitive area, the Yarra Valley in the environs of inner Melbourne. Whilst the Victorian Government said that it chose the tunnel option to obviate environmental risks associated with the project, it may be found, on closer inspection, to accentuate environmental risk, rather than reduce it.

Stop North East Link Alliance submits, in conclusion, that the Commonwealth should reassess its position on capital funding for the NELP. Simply, a project of this scale should have a much greater positive benefit cost ratio than 1.3. This alone, should call the project into question.