Chinese Concerned About Infrastructure Projects Continue to Be Delayed

The Suburban Rail Loop (SRL) project in Melbourne, Australia, has been in the spotlight as infrastructure costs continue to rise around the world. The project, which could cost hundreds of billions of dollars, has not only become the most expensive infrastructure project in Victoria’s history but has also triggered an in-depth discussion about the feasibility of large-scale rail transportation projects. The viability and financial sustainability of the SRL are of particular concern, especially as the UK’s high-speed rail line, HS2, has been forced to downsize due to soaring costs.

Renewed uncertainty

For the past few years, the Victorian government has been promoting a major project: the Suburban Rail Loop, which will have far-reaching implications for Melbourne’s Chinese community, connecting many of Melbourne’s major Chinese neighbourhoods, including Box Hill, Doncaster, Glen Waverley, Monash, and Clayton, with a direct link. In the last two years, the Victorian government has been pushing hard for a rail loop, even going so far as to suspend construction of the Airport Railway. The Suburban Rail Link East to Box Hill is scheduled to open in 2035, but there is little to convince anyone that this will happen. Recent talks between the state and federal governments could put the project on hold indefinitely. The Commonwealth Government has reiterated that the $2.2 billion it has committed to Victoria is not to support the entire rail loop and that it is to be implemented in accordance with the procedures of the Commonwealth Government’s Audit Office, which will approve the work.

The fact that the SRL is starting the first phase of the East Link before the 2022 Victorian election, before the start of the project and before the funding source has been determined, is a big gamble on the part of Premier Daniel Andrews. The Chinese community was very supportive of the project because of the significant improvements in housing prices and transportation in the area which resulted in their one-sided support for Andrews in this election, which SRL believes is the reason why. However, the project is now stalled, the government is short on funds, and the federal government has failed to provide the promised funding. The federal government’s recent proposal to divert funding to the Airport Railway suggests that federal Labor would be more willing to put its resources into a project that Victoria residents would support rather than take the risk of putting the uncertain future of the SRL on the line.

Federal Treasurer Jim Chalmers has said that the Airport Railway and the SRL are two separate projects, and theoretically have no impact on each other, but anyone with eyes can see that if the Victorian government abandons or delays the SRL, the federal government will have an even stronger case for supporting the Airport Railway immediately, and boosting the support of the people of Victoria in the upcoming election.

Now that the pressure of Victoria’s debt is out in the open, and if we insist on pushing this project forward it will only make the situation worse, Victoria is desperate for support from the federal government. However, the federal government is also struggling to make ends meet, and the latest financial report shows that the deficit has increased again, so the federal government is hoping that the Victorian government will abandon the construction of the first phase of the rail loop for the time being. The first phase of the SRL is estimated to cost $34 billion, and the whole project is estimated to cost more than $216 billion (potential costs of construction + operation). This figure is reminiscent of the UK’s high-speed rail project HS2, which saw its budget skyrocket from an initial £37.5 billion to over £170 billion.

It’s easy to see the current trend of escalating rail infrastructure costs around the world. The main reasons for this include: supply chain disruptions and inflation in the wake of the Covid-19 pandemic, which has led to a significant increase in the price of raw materials such as steel and cement; a global shortage of workers in the construction industry, which is further pushing up project spending; and protests by residents and businesses, which are a major obstacle to land acquisition and are increasing the cost of land purchases and compensations. Other uncertainties such as adjustments in project planning and design to accommodate local government and multi-stakeholder demands often lead to cost fluctuations, and changes in policy priorities and funding support as projects change from one administration to the next further add to the uncertainty.

Airport Railway may restart construction.

The federal government has not been supportive of a rail loop that would link many suburbs, and over the past few months has been trying to get Victoria to give up its plans for the rail loop. Now that the federal government has promised Victoria $2.2 billion for a rail link to Melbourne Airport, it has put pressure on Victorian Premier Jacinta Allan to abandon the suburban rail loop, and even more brutal news is that the Victorian Opposition has said it will axe the project if it can win the 2026 Victorian election against Labor. Since the resignation of the previous Premier, Daniel Andrews, the Victorian Labor government’s approval ratings have been slipping, and are now on the verge of a very dangerous decline, to a seven-year low.

Although the first phase of the rail loop looks to be on the back burner, because of the federal government’s strong support for the construction of the Victorian Airport Railway, if the Victorian government relents and changes its priorities, the Airport Railway could go ahead as soon as possible. As Australia’s second-largest city and a well-known cosmopolitan, Melbourne has been criticized for not having a direct rail link to the airport. The Commonwealth government wants the Airport Railway to start and open to traffic as soon as possible. The Airport Railway has been on hold for four years for the Rail Link, so if it resumes soon, Melbourne may soon be able to take a train to the airport, a step forward in public transportation. In addition, the total investment in the Airport Railway project is much lower than other projects in the rail loop, with a total investment estimate of $10 billion, plus the Commonwealth Government’s commitment of $2.2 billion, which will instantly reduce the financial pressure on the state of Victoria. Why not?

The Victorian government is currently running a huge deficit, with a total debt of more than A$160 billion, and there is very little chance of the SRL funding gap being filled in the next few years. This not only puts the project at risk of being shelved but also puts other infrastructure projects such as the Melbourne Airport Express and Geelong Express in a race for funding. The Victorian Liberal Party has always opposed the SRL because the state government is already struggling financially and the project is too remote to be necessary. The current Governor, Jacinta Allan, doesn’t seem to agree with this change in priorities and insists on working on both the Airport Rail Link and the Suburban Rail Link projects together. It’s just that real money doesn’t change just because someone wants it to.

However, if Allan is to press ahead with the SRL, she will have to convince the Cabinet how to find enough money to continue these projects in the future. Obviously, the Victorian government will have to raise revenues in the short term, issue more debt, or reduce spending on some projects. But with the departure of experienced Treasurer Tim Pallas and the 2026 election looming, the Allan administration’s financial situation will be even more difficult to manage. However, if the funding chain breaks and the Victorian government is unable to operate, the Liberal Party has been claiming that the SRL project will be terminated if the Coalition is in power in 2026 when the Labor Party’s approval rating in Victoria is low. At that time, the SRL will eventually be shut down, so if the government is able to improve Victoria’s economic situation by delaying the SRL, it may be a better choice.

However, if this is the case, Premier Allan, who was in charge of infrastructure in the previous government, will have to bear the greatest responsibility, and the opposition party will definitely pursue him hard, it is still unknown whether Allan can continue to lead the government at that time. Whether SRL will continue to be built or not is a matter of great political consideration.

Infrastructure is a persistent problem.

Developed countries face the problem of aging infrastructure in terms of labour costs, supply chain dependence on imports, and a steady trend of urbanization. In addition, Australia’s limited population size means that the marginal cost of building large infrastructure is high, so the economy can only expand. Inadequate investment in infrastructure is a major obstacle to sustainable development in many countries and is insufficient to meet the rising demands of life. Australia’s emergence as a developed nation after the Second World War, with world-leading living and income standards, coupled with the growing power of labor unions and a mediocre political culture of complacency, are the biggest barriers to infrastructure development, not to mention the historical baggage of previous infrastructure refurbishments, which has prevented further revolutionary advances in infrastructure.

Since the global financial crisis, Australia’s economy has grown faster than many other developed countries. In recent years, however, steady growth has been challenged by the waning of the mining investment boom. The state of the Australian economy has also become increasingly worrying, particularly since the Covid-19 pandemic. With the massive influx of immigrants, the severe lack of infrastructure, a perennial problem in Australia, is becoming increasingly evident. In every federal budget, infrastructure spending is a major concern, often amounting to tens of billions or hundreds of billions of dollars. However, whether it is highways, railroads, tunnels, or the Internet …… one word: expensive! Moreover, overruns are a common occurrence.

Victoria’s credit rating is already the lowest in Australia, and if fiscal pressures are not alleviated, this rating will be further downgraded, which will lead to another increase in the state’s borrowing costs. According to the current trend, Victoria’s total debt will reach A$187.8 billion in the 2026-2027 financial year, so in order not to further increase the credit rating and financial pressure, the Victorian government may also prioritize the construction of the airport railroad. However, another factor that must not be ignored is this year’s federal election and next year’s change of government in Victoria. In Australia, both state and federal governments are elected once every three years. For a large infrastructure project, it may be difficult to complete the preliminary planning and approval procedures, and then it may be time for a general election. If there is a change of government or even a change of party in power, it is very likely that all the previous things will be overturned. The political disputes between the two parties will lead to a serious waste of funds, and the efficiency of infrastructure promotion will naturally be significantly reduced. The current uncertainty of the Victoria government, which may not make any real moves on its infrastructure projects until the federal election is settled, has again lowered the efficiency of the projects. In the end, it may just be a case of “tearing down the east wall and repairing the west wall”, which in effect exposes the ineffectiveness of democracy, and the projects that will really benefit the public will remain in the campaign slogans of the politicians, which will not be put into effect after a long time.

Metro underground railroad to be completed

In addition to the SRL and the Airport Railway, there are a number of projects underway in Victoria. The Metro Tunnel, which runs through the city centre, has five new platforms, three of which have been completed and are expected to open this year. The Victoria government expects that the completion of this project will increase the support of Victoria residents, so the government is trying to speed up the progress. However, this project is actually convenient for a large number of students living in urban areas, and its impact on the local residents is relatively small, so it has not attracted much attention.

However, if this project can be completed early, I believe it will ease the pressure on other infrastructure projects, and may be a lifeline for the Victoria government.

Editorial Department of Sameway Magazine

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