24 February 2016
Topics: Melbourne Metro Rail project
Neil Mitchell: But I want to look at this quickly, because Daniel Andrews yesterday sort of out of nowhere put it all on the line to the Federal Government—he wants $4.5 billion to build the Metro Rail tunnel. It's much more than first expected, the whole strategy for funding seem to be rewritten. It's come out of nowhere. The State Opposition said he's thrown a brick with a demand on it through Malcolm Turnbull's window. Certainly he's pressuring the Prime Minister. This is what he said in his press conference—
Daniel Andrews: I can only be confident that a Prime Minister who supports public transport will back the biggest and best public transport project anywhere in our nation. That's what I'm asking for, it's a fair share for a great project, and let's wait and see what the Prime Minister says.
[End of excerpt]
Neil Mitchell: $4.5 billion after the disaster of East West Link—now as the Turnbull Government does need Victoria in any election, it might be tempted to help. On the line the man in charge of it all in our Canberra Studio, the Federal Major Projects Minister, Paul Fletcher. Good morning.
Paul Fletcher: Good morning Neil, good to be with you.
Neil Mitchell: Can it be built without you?
Paul Fletcher: Well that's a question the Victorian Government would be best placed to answer right now.
Neil Mitchell: What would you think?
Paul Fletcher: Well, it's an expensive project. Major projects around the country typically have a commonwealth involvement, but not always. So if you look at what's been done in New South Wales for example, there are some very big projects there which the New South Wales Government is carrying forward by themselves. But equally, we received the business case yesterday—late morning. The Premier was doing media early afternoon, saying time for Turnbull to back the Melbourne Metro. So if you were building a house and you said you lodged your application for a loan with a bank manager, and you went out there publicly saying the bank manager must give me the money, that might be a slightly curious way to proceed.
Neil Mitchell: So you only got the business case late morning …
Paul Fletcher: We did.
Neil Mitchell: … and Daniel Andrews announced it publicly at 1:45?
Paul Fletcher: That's right.
Neil Mitchell: Well that's a bit rough.
Paul Fletcher: But look, my colleague Transport and Infrastructure Minister Darren Chester and I have spoken with Jacinta Allan, the State Minister, this morning. We've asked her if she can come to Canberra next week to give us a briefing, and our offices are now working on the time for that. So we'll sit down and we'll have that conversation with her. And of course what now needs to happen is the Commonwealth Government will have Infrastructure Australia study the business case carefully. We're not in the business, unsurprisingly, of handing over a check for $4.5 billion just because we're asked for it.
Neil Mitchell: If you're going to agree to it, do you have to do so before the budget?
Paul Fletcher: We will look at this on its merits, and of course one of the issues is how it fits into the overall Infrastructure Investment Programme of the Commonwealth Government, which is $50 billion being spent on projects right now all around the country, including in Victoria. Now, one of the things we need to understand is when will construction commence—as we understand it's 2017 over an eight-year period. We don't know yet what timing the Victorian Government is looking at in terms of when it is after cash.
We also need to look at questions like if we were to provide support would it be in the form a grant, would it be a loan, would it be an equity injection? These are all questions to be answered. But there's a threshold question: will the Commonwealth Government be in a position to support this, and if so with how much money? We need to get Infrastructure Australia to do a detailed assessment before we can answer any of those questions.
Neil Mitchell: How long will that take?
Paul Fletcher: Well that will take some period of time, probably some months. We'll work through that. Infrastructure Australia is the provider of advice to the Commonwealth Government, because of course there are many more projects around the country that seek funding than can be funded. We are providing huge amounts of funding, $50 billion on projects all around the country. And of course, it's important that we deliver the right outcomes for the people of Melbourne, of Victoria, and Australia. So we will work constructively with the Victorian Government.
Neil Mitchell: But you're not ruling out being involved in this to the tune of $4.5 billion?
Paul Fletcher: We are not ruling it out. What we are saying is that we need to study the detail before we make any decision on whether we provide support, how much, and in what form. Would it be a loan? Would it be a grant? Would it be equity? We need to work through all of that, and the first thing is that my colleague Darren Chester and I will meet with Jacinta Allan, the Victorian Minister, next week so she can brief us personally rather than us hearing about it through the media.
Neil Mitchell: Yeah fair enough. So where's the billion dollars that was provided for East West Link? Did you ever get that back?
Paul Fletcher: There's $1.5 billion of Commonwealth money that was provided to the Victorian Government. Treasurer Morrison is in discussions with his state counterpart. Now what we've said is, if that money is to be used for transport infrastructure it must be used in a project that is approved by the Commonwealth Government through the normal processes. If that can't happen the money needs to come back.
Neil Mitchell: So could that be tipped into this, into the Metro tunnel?
Paul Fletcher: All of that needs to be determined, and I'm certainly not saying that for a second. What we need to do is go through a proper, rather than make decisions on the run, because the Premier's given a press conference saying I want a cheque for $4.5 billion.
Neil Mitchell: Well is it, as Matthew Guy's said, like he's thrown a brick through the window with a demand on it?
Paul Fletcher: Look, is it the ideal process? Absolutely not. But the important thing here is delivering infrastructure for the people of Melbourne, of Victoria, and of Australia, and working together in a sensible way. Is this the best use of money? Are they, for example, making use of value capture? On major urban rail projects around the world, what's increasingly happening is you're saying okay can we capture some development profits to contribute towards the capital cost? That's what's happening in Hong Kong and in London for example. So those are questions we want to ask on the detail here.
Neil Mitchell: The business case is, they say, $1.10 return for every dollar spent. On the face of it is that good enough?
Paul Fletcher: That is not at the high end of the typical ratios you see. At the same time, public transport projects typically are towards the lower end in benefit-cost ratios. But these are all questions of detail. The points you're making Neil are very good ones, and these are things we need to study and work through. The Commonwealth doesn't profligately hand out money; what we do is work constructively with the state and territory governments all around Australia. That's what we've done to deliver the $50 billion Infrastructure Investment Programme that's presently underway. We'll work constructively with the Victorian Government, as we do with all governments, regardless of politics.
Neil Mitchell: Thank you very much for your time. The Federal Major Projects Minister, Paul Fletcher, in our Canberra studio. So Jacinta Allan is flying up to Canberra to talk about it—well, I reckon it might have been a good idea to talk about it before you threw the brick through the window. I think Matthew Guy's description is appropriate.