Page 4125 - Week 13 - Wednesday, 26 November 2014
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Infrastructure Australia’s general position is that any project that achieves a cost-benefit analysis of over two is a viable project worthy of further consideration. So we are in a strong position in relation to that cost-benefit analysis.
Again, what does that say about a cost-benefit ratio of 1.2? Reality is catching up with Mr Corbell and Ms Gallagher. On 16 May 2013 Minister Corbell said about light rail:
The cost projections have been continually revised downwards over the last six to 12 months, and that is as a result of more detailed analysis occurring.
Yet somehow the cost has gone from $614 million to $783 million. And that does not include the real risk of this government blowing yet another infrastructure project, as this government has done so many times before. Minister Corbell has tied himself in knots on numerous occasions, and that is what happens when you reverse-engineer a business case to suit an outcome.
Does anyone in Canberra actually think that the ACT Labor government can deliver this highly complex project in a PPP and not get taken for a ride? The full business case states that the recommended delivery model is an availability public-private partnership. This means that we pay nine, 10, 11 or 12 per cent finance. It is fascinating that the full business case does not mention this. It does not mention the fact that we could be paying $100 million per year in interest every single year for 30 years. So it is not $783 million for this project—it is considerably more. It does not take into account the interest we are paying over 20 or 30 years at nine, 10, 11 or 12 per cent.
They could have gone to a bank and got four per cent. They could have got an intergovernment loan and got four per cent. Instead they are going down the path of a PPP and they are going to be paying nine, 10, 11 or 12 per cent finance. It could very well end up costing $100 million per year in financing costs.
It is fascinating that the full business case does not mention this, and even the Australia Institute has come out in criticism of this delivery model. Of course, we would all be aware of the advice provided to governments of different persuasions by David Hughes. In his latest piece in the Canberra Times on 17 November he said:
Land use and wider economic benefits valued at $579 million are described in a few paragraphs in the business case. The appendix provides some of the assumptions used in modelling. But there is no evidence or analysis to explain how these benefits have been estimated or how they are connected to the light rail project.
He went on to say:
The business case says ‘there will be over 3,000 additional public transport boardings each day across the network by 2031’. This equates to 1,500 return trips. Half of these will be in off-peak periods, when congestion and travel times are not a problem. To put this in perspective, at a cost of about $90 million a year under a public private partnership agreement, the project will change the commuting habits of 750 Canberrans by 2031. About 200,000 Canberrans travel to work each day.
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