JOHN AUSTEN. Doubts about infrastructure go beyond Sydney Metro.

Sep 18, 2017

John Menadue recently asked for an open public inquiry into the NSW Metro scheme.  Given the momentous questions about that scheme and its supposed evaluation there is no doubt such an inquiry must be Australia’s highest infrastructure priority.

 https://johnmenadue.com/john-menadue-it-is-scandalous-how-infrastructure-spending-escapes-proper-scrutiny/ 

Serious questions about projects and evaluations don’t stop there.  Infrastructure Australia’s evaluation of Westconnex also demands revision.

It was recently revealed that Westconnex will no longer extend as first planned to Sydney’s Kingsford-Smith airport or Port Botany.  The media’s concern is whether motorists will be slugged yet another toll as they exit Westconnex – for another road to reach the airport.

Perhaps a bigger concern is Infrastructure Australia’s enduringly positive evaluation of Westconnex despite apparently significant changes to its functionality.  The assessment assumed a Westconnex-airport and seaport connection was part of the core functionality that the taxpayer was getting for its $17-20 billion dollars; apparently the relevant Sydney Gateway was to have costed $800 million.

What now is the public to make of the increase in costs of a ‘Sydney Gateway’ no longer provided by Westconnex but purportedly by a third party – at more than double the cost assumed by Infrastructure Australia in its original Westconnex assessment? (http://www.smh.com.au/nsw/1-billion-cost-blowout-in-westconnex-gateway-project-to-sydney-airport-20170810-gxt6wc.html)

What impacts do such scope reductions of Westconnex have on the merits of the overall project?  We cannot tell, from what Infrastructure Australia published.

Infrastructure Australia’s brief summary evaluation of Westconnex – similar to its fleeting assessment of the even more expensive Sydney Metro rail – recited NSW Government claims of a benefit/cost ratio of 1.7.  While not stating Infrastructure Australia’s own estimate, the summary implied a belief that the true ratio was less than this, closer to 1.0 – perhaps only just passing an economic merit test.

The summary said sensitivity tests provided some confidence for this belief.  However, it did not say what sensitivities were tested.  Did Infrastructure Australia test exclusion of the Sydney Gateway?  Did it increase the cost of this gateway connetion by more than double to see what that did to the business case for taxpayers?  Did they consider ‘toll saturation’ (a big topic in Sydney)?  Did Infrastructure Australia consider the financial costs for other roads arising from Westconnex?  Or cross-subsidies from other roads? Or less motorist demand due to an additional toll? These are all valid areas of analysis on behalf of taxpayers, given the billions at stake.

Some simple arithmetic might help to illustrate the point.  A billion-dollar extra cost would reduce WestConnex’s benefit/cost ratio by between 0.1 and 0.2.  If the true starting ratio was say 1.5 instead of the 1.7 asserted by the NSW Government, there might not be a real problem.  However, if it was below, say, 1.3, there might be a very big problem.

Hence it is not certain but at least possible that Westconnex is uneconomic because of scope and cost changes.  Such a possibility is increased if a West Metro was factored in – a fact even pointed out by a NSW Government memo!

Infrastructure Australia’s promoted importance of Westconnex, its $17-20 billion price tag and the lack of clarity in its summary are reasons enough for us to demand clarity and depth of analysis by independent parties.

Infrastructure cheerleaders may argue that as Westconnex is already underway, this call for clarification is merely trouble-making  –  Infrastructure Australia should not be asked to reassess its independent view.

That is a very bad attitude.  It undermines the integrity of and confidence in assessments.  Turning a blind eye to major shifts in what Westconnex purports to do and how much this might cost would encourage other States and wider proponents to try to mislead Infrastructure Australia and therefore the Commonwealth and the public on future projects.  On this basis, costs in said future projects could be omitted, the benefits exaggerated and functionality brazenly misrepresented, safe in the knowledge that there are no reviews or changes to the independent umpire’s first view of a given project’s merit.

The expenditure of tens of billions of dollars, and agreement to plans that in some cases will shape our cities irreversibly, should not be treated like a football game where the umpire’s first call is final.

Happily for Infrastructure Australia, it has already set its own precedent that should allow these major changes and questions around Westconnex to be reviewed in a straightforward manner.

Infrastructure Australia recommended a $4.5 billion dollar Cross River Rail project for Brisbane three times; twice under Anna Bligh’s Labor Government (2011 and 2012) and also under Campbell Newman’s Liberal National Party Government (2013).  However, after subsequent scope and cost changes by Anna Palaszczuk’s Labor government, Infrastructure Australia revised its evaluations and did not recommend Cross River Rail as a national infrastructure priority in 2017. Very odd!

Infrastructure Australia itself recently argued the community ‘needs to be educated’ about road matters.

What better way to start than a solid review of the revised Westconnex!

If an improved evaluation is not forthcoming soon, we have another candidate for an open public inquiry to sit alongside Sydney’s Metro.

John Austen was head of economic policy at Infrastructure Australia until  2014.  He is now a happily-retired Sydney western suburbs dweller.  More details are at his website The Jade Beagle.

 

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