Australia’s independent infrastructure oversight body has raised significant concerns regarding the viability of Victoria’s long-anticipated Suburban Rail Loop (SRL) project. In a recent report, Infrastructure Australia cautioned the federal government to approach any further financial commitments to this multi-billion dollar initiative with great care.
The watchdog’s evaluation of the project’s business case highlighted the need for updated, comprehensive budget estimates and a thorough cost-benefit analysis before additional investments are made. The report stated that confidence in the cost estimates for SRL East is low, posing substantial risks not only to this segment of the project but to the entire SRL programme.
Early projections indicate that the initial phase, SRL East, will require at least $34.5 billion, landing at the top end of the state government’s original estimate range. Currently, there exists a $9.3 billion funding gap that Victoria is hoping the federal government will help bridge.
The report pointed to industry-wide rising construction costs, which have not been reflected in the business case since it was presented in 2020. It suggested that the total capital costs for SRL East have likely surged based on these increases. Furthermore, Infrastructure Australia described the economic forecasts for SRL East and SRL North as “overstated,” indicating potential financial discrepancies.
One surprising aspect of the funding plan is that approximately one-third of the capital needed for SRL East relies on value capture mechanisms—a strategy that experts have labelled a “major risk.” They expressed concerns that there is inadequate detail in the funding proposal to assure that such mechanisms can successfully cover a significant portion of the required costs.
Envisioned to connect major train services across Melbourne, the entire SRL project comprises four segments: SRL East, SRL West, SRL North, and the airport rail link. Construction for SRL East, which aims to establish a 26-kilometre twin tunnel route linking Cheltenham to Box Hill with six new underground stations, commenced in 2022. The Victorian government asserts that the project is set to create 8,000 jobs, aiming for trains to be operational by 2035.
The urgency of the situation was underscored when federal Infrastructure Minister Catherine King pledged $2.2 billion in funding for the project last month, whilst also noting the “hurdles” that the Victorian government must overcome to ensure its success. With the Victorian government seeking one-third of the total funding from the federal level, calls for clarity on the project’s financial feasibility grow ever louder.