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Victorians being punished for ditching the East West toll road

Estimates & Committees
Janet Rice 11 Feb 2016

Senator RICE: I will move on to projects that have commercial-in-confidence issues with them and start off with Victoria. Victoria has been sitting the lowest on the list of states in terms of Commonwealth funds for infrastructure. Is it still the case that, per person, Victorians are well behind in terms of funding?

Mr Mrdak: As I indicated to Senator Conroy earlier, successive governments have not funded infrastructure on a per capita basis for many years. We provide certain per capita funding in programs that are general purpose grants, such as financial assistance grants, but in terms of individual infrastructure projects they are on a projectby-project basis. The state of Victoria took a decision not to proceed with a key project. That was a judgement of the state of Victoria. The Australian government is now discussing with the state of Victoria other projects in that state which may receive Commonwealth funding assistance given the decision not to proceed with the East West Link road project. I think that is the clearest way I can put it. I cannot comment in relation to per capita because that is not the basis on which the Commonwealth has for many years sought to attribute funding.

Senator RICE: But we are in a situation now where Victoria has about eight per cent of federal infrastructure funding compared with a 20 per cent population?

Mr Mrdak: Those figures would depend very much on future decisions of the Victorian government in relation to—

Senator RICE: But that is the current situation?

Mr Mrdak: I have not checked that, but if that is the case then it is somewhat contingent on future decisions of the Victorian government as to which projects they progress. The Australian government has made a contingent provision should the East West Link road be brought back into scope and also is talking to the Victorian government about other alternative projects.

Senator RICE: Moving on to those other alternative projects—Transurban's unsolicited proposal to the state government on the Western Distributor. I understand that the business case for the Western Distributor has been provided to government.

Mr Mrdak: We have received the Victorian government's reference case. I will ask Mr Foulds to take you through that, because it is quite an important distinction as to what that is.

Mr Foulds: The Victorian government has provided the Australian government with its business case, which is a reference document and assumes delivery by an independent authority. It is not the Transurban market-led proposal. As a result of having developed that business case and taking into account the Transurban proposal and working through that, they are now at stage 4 of the five-stage process.

Senator RICE: Can you go through those? Is it a Victorian government five-stage process or a federal government one?

Mr Foulds: Yes, it is a Victorian five-stage process. Stage 4—and I do not have the five stages written down, but I can get them for you easily—is direct negotiations with the market-led proponent, which means direct, exclusive negotiations with Transurban. Stage 5 will be a decision by the Victorian government as to whether to accept it and go ahead.

Senator RICE: Given that the federal government has been given that reference case, what is your process for going through and assessing it?

Mr Foulds: We have also gone through that and we continue to go through that reference case to assess the impact and the project as a whole, as we would with any other project.

Senator RICE: Can you step me through what your process for deciding whether to support that case is going to be?

Mr Foulds: The process begins, as it does with all projects, with the information that is provided and then understanding the scope and time frames and, in the case of the Western Distributor, understanding the funding and financing that is set out in the reference business case, then working through that and the various options and permutations that might be available and are at the disposal of governments should they wish to take it further.

Senator RICE: Does your assessment as to whether to support that project with federal funding depend upon going through an Infrastructure Australia assessment as well?

Mr Foulds: Infrastructure Australia will assess that project, but they are on later today so you could explore that with them.

Senator RICE: But a decision on whether to fund the project would have to be contingent upon completion of the Infrastructure Australia assessment?

Mr Foulds: The Australian government's position is that, for investments of over $100 million in Australian government funding, projects need to have been assessed by Infrastructure Australia.

Senator RICE: What is your understanding—what do you expect the timeline to finish that federal process is going to be?

Mr Foulds: How long is a piece of string, Senator? But I think we would be looking at trying to nail that in this calendar year.

Senator RICE: When do you expect to have the Infrastructure Australia assessment completed?

Mr Foulds: You would have to ask Infrastructure Australia.

Senator RICE: I will be asking them.

Mr Foulds: I do not have the answer to that.

Mr Mrdak: Senator, we were only provided with the reference business case at the end of November. This will take some time given the complexity of the issues to be worked through.

Senator RICE: So your process for working through—how much influence or how different are they given that this was an unsolicited market-led proposal initially? I understand that you are saying it is now a Victorian government reference case, but is it a different process that you will go through in terms of looking at the finances?

Mr Mrdak: We are looking at the Victorian government reference case. That is the one we will focus on because that has essentially made some adjustments to what was, as I understand it, the unsolicited bid—it does contain elements such as the widening of the Monash Freeway, enhancements of access in and out of the port and the like. Our focus is on the Victorian government reference case. That is where our focus is.

Senator RICE: Has the government been provided with a full business case, including all of the appendices?

Mr Mrdak: We have been provided with the Victorian reference case. There is still further work going on, as Mr Foulds indicated. There are additional stages to the Victorian assessment which will need to be completed. So, no, we do not have the completed piece of Victorian work.

Mr Foulds: Then there will be another one. If Transurban's bid is successful then that will be the final one that would be taken to market and that would also require assessment to see whether it was different.

Senator RICE: So we have three things then?

Mr Foulds: No, Senator—it depends. We are doing the reference business case now. That does not assume that it is Transurban doing the work.

Senator RICE: Is that the same business case that the Victorian government has released publicly?

Mr Foulds: The redacted version that they have released publicly—yes, it is.

Senator RICE: So you have got the full version—the non-redacted version with all the appendices?

Mr Foulds: Yes.

Senator RICE: Have you seen what was reported in the Age today, I think it was, that there were independent assessments of the business case undertaken by infrastructure experts Tony Canavan and Kerry Schott?

Mr Foulds: I have seen the article. I would have to take that on notice.

Senator RICE: So you do not know whether you have been given those independent assessments?

Mr Foulds: I have only just read the article this morning, so I would like to take that on notice.

Senator RICE: Would you be able to get back to me sometime today as to whether you have seen those independent assessments?

Mr Foulds: I can try.

Senator RICE: That would be appreciated, because obviously it is critical information that the public is not being given the opportunity to look at. Given that you have the Victorian government reference case, which must have some information about how it is proposed to be funded, what is your understanding of the proposed funding arrangements for the project?

Mr Foulds: There are a number of options that are being worked through and no decisions have been reached in a particular sense, but there would be a tolling regime applied and there would be a government grant. The permutation of that is being worked through and how that would be exactly funded and financed. But they are the sorts of things. If it goes ahead, there will be a public-private partnership and a tolling regime and there will be an element of government grant.

Senator RICE: Has there been a specific request to the federal government for a contribution toward the project?

Mr Foulds: There has not been a specific request or a cast-iron request for an amount because those discussions are not yet settled and the business case has not yet been analysed. I understand Infrastructure Australia has not finished its work either.

Senator RICE: The Victorian government seems to consider it pretty much a fait accompli, from the media reports, that there would be federal government support for this project. Do you think their confidence is justified?

Mr Foulds: I cannot comment on the Victorian government—

Mr Mrdak: That is a matter for the government once they have further considered it, Senator.

Senator RICE: Senator Colbeck?

Senator Colbeck: Senator, we are working our way through a process and once we get our way through the process we will make some decisions. A lot of what you are talking about is quite hypothetical, so let us work our way through the process.

Senator RICE: Do you acknowledge that in your discussions with the Victorian government there seems to be an assumption that there will be federal money for it? The media reports we have seen indicate that $1.5 billion from the federal government is the funding package. The state government will be putting in $400 million, but that money would be allocated to the widening of the Monash Freeway.

Senator Colbeck: Senator, a lot of people will make assumptions as this progresses, I am certain, from a range of perspectives. We are talking quite actively with the Victorian government on their project priorities. As we work our way through those discussions, we will come to agreement on a number of projects, I am sure.

Senator RICE: Let us move on to those other projects. I want to move on to the Melbourne Metro Rail Project and what status that currently has.

CHAIR: You may have to come back to that if you are going to go on.

Senator RICE: I have a very small amount on both of these other two projects. What is the current status of the Melbourne Metro Rail Project as far as the federal government is concerned?

Mr Mrdak: At this stage it remains a matter with the Victorian government. We have not received any business case or formal request for assistance at this stage. The Victorian government has successively sought a Commonwealth commitment, but the Commonwealth at this stage awaits further information in relation to the design and the cost of the project. That is still some time off.

Senator RICE: Senator Colbeck, how can the federal government make decisions about priorities if it has not got the information for that public transport project at the same time it is getting information about the road project?

Senator Colbeck: It cannot make a decision on one project if it does not have the information on the project. As I said—

Senator RICE: But you just said that you would be making decisions based—there would be a suite of projects and there would be priorities. I am wondering how the federal government can be—

Senator Colbeck: That is the point of the discussion, Senator. While we are having the discussions, while we are waiting for the information and until we get the information, we cannot make those decisions.

Senator RICE: So would you be waiting to make a decision on funding the Western Distributor project until you have information about the Melbourne Metro Rail Project?

Mr Mrdak: This is one of the difficulties we face. Jurisdictions will put up more advanced business cases at certain times and it makes it very difficult. The Victorian government is working. It has indicated that the Melbourne Metro remains one of its priorities, but at this stage we are yet to see any details of the business case or its design. So at this stage it is very difficult to make a comparison. Obviously, under our process we would like to be in a position, as would Infrastructure Australia, where you are looking at a multitude of business cases and you are making priority decisions. The timing of the bring-forward of some of these business plans means that that is often difficult.

Senator RICE: So you would prefer to have these projects together. But do you feel that you would need to wait until you have the Melbourne Metro business case before you made a decision on the funding of the Western Distributor?

Mr Mrdak: That is something which is going to be a judgement that government will have to make if it decides to support the Western Distributor. The Victorian government has been looking for a commitment to the Melbourne Metro but has not yet been able to indicate what extent of financial commitment it is after and it is far too early in its business case to do that. It has allocated some initial money for planning and preconstruction, but we are yet to see the full detail of the project, which would enable that sort of judgement to be made by the federal government.

Senator RICE: But you would prefer to be looking at them both together?

Mr Mrdak: Obviously, you would like to be able to see a range of projects, recognising that a project like the Melbourne Metro is a project that will not substantially have a lot of construction until it least early 2020. So it is a difficult one.

Senator RICE: Well, it depends on how much of a priority it is for the Victorian government.

Mr Mrdak: I think that is their indicative timetable—that most of the construction will be at the back end of this decade or early next decade.

Senator RICE: The other related project which has got federal funding towards it is the Port Rail Shuttle, which appears to still be in limbo with the Victorian government. I think there is Commonwealth funding of $37 million that was allocated to the Port Rail Shuttle. What is the timeline? Is that money at risk of expiry if it is not spent by the Victorian government?

Mr Mrdak: It is not at risk at this stage. It remains in the program. We had been talking to the Victorian government and also to a number of the intermodal terminal operators. We believe that is a very important project. Unfortunately, the Victorian government has decided to await the completion of its process of the longterm lease of the port of Melbourne. It is my understanding that bidders for the port have been asked to include plans for rail upgrades and connections to the port as part of their future investment strategies were they to be the successful purchaser of the lease. Unfortunately, what that has meant is that we are unable to have a detailed discussion and settle a time frame for the investment of the Commonwealth money that is committed to the intermodal terminals and rail upgrades. I will just check with my colleague Mr Wood, who may wish to add some further detail to that. Mr Wood: I think Mr Mrdak has actually covered the issue entirely.

Senator RICE: So at this stage the money is in limbo if there is no expiry date. 

Mr Mrdak: It is in the five-year program. We await advice from Victoria.

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