Metronet is like a cheeky dog at Christmas dinner, nabbing bits of ham when you’re not looking until it is nothing more than bone and he needs to be taken to the vet to have its stomach pumped.
At the mid-year review announcement on Tuesday, Treasurer Rita Saffioti handed down yet another impressive set of budget figures with the economy firing and royalties flowing. But dig deep enough, and you’ll find Fido’s been at the ham again.
The cost of Metronet has blown out - again.Credit: WAtoday
Since December last year, the cost of delivering Metronet has ballooned by an eye-watering $2 billion, taking the total cost of the network north of $11 billion.
That includes the $1.2 billion blowout due to materials and labour costs flagged in the May budget, as well as a further $700 million provision in Tuesday’s mid-year review for unassigned dollars to cover “updated costs and timing”. There was also another $181 million for the Bayswater station upgrade cost increases – that’s a lot of ham.
Fortunately, half of this will be funded by the Commonwealth, but the increase this year alone is two-thirds of the total Labor promised its public transport vision would cost taxpayers while in opposition in 2017.
In fairness, the scope of the network has increased dramatically since then, with plenty more bells and whistles on the network than first promised (a lot less level crossing bells and whistles).
But with cost blowout after blowout, Metronet is primed to dent the government’s fiscal credibility.
It also leaves the government exposed in other areas where decision-making is based on saving cash.
A prime example is the site of the new $1.8 billion women’s and babies’ hospital.
How can the government say, with a straight face, that the decision to build it at Murdoch would save the state $228 million when multiples of that have been happily added to Metronet over the past four years?
Saffioti defended the cost jumps on Tuesday, repeating previous commentary that WA builds rail at a tenth of the cost of our east coast counterparts, and of the costs we do incur, half of those are shared with the Commonwealth.
“That’s something we’re very proud of because we have been able to deliver at a minimum compared to other states,” she said.
Saffioti also pointed out that while the state has embarked on its most ambitious ever rail program, it has also been reducing debt – which is down another $2.2 billion since May.
Ultimately though, she said the work being completed now would have massive impacts on the future of Perth.
“So yes, it has been affordable, and it will set the state up for generations to come,” she said.
“This is once-in-100-year infrastructure, and it delivers affordable transport to new households, and makes sure that we’re not playing catch-up in 10 years’ time.
“We’re actually delivering it at the right time.”
So far, the state has been shielded by historic iron ore royalties (an estimated $9 billion this year up from $5.9 billion expected back in May) and there is so much cash flying there is plenty to cover those blowouts and still deliver government services at an acceptable level.
But how long can this last?
Saffioti herself conceded WA was susceptible to commodity prices but said that was why the government budgeted those long-term iron ore prices conservatively.
She also said the government invested heavily in other infrastructure that supported revenue-driving sectors like mining.
Saffioti expects there may be some inflation reprieve on the horizon with materials prices stabilising after three years of volatility.
Labour remains an issue and the state is still making a mess of being able to deliver its $42 billion infrastructure pipeline alongside major resources projects and building enough houses.
Most major Metronet projects are set to be completed in the next three years and there are still many budgets and mid-year reviews in that period.
It looks like we will have to get used to sharing our ham with that cheeky dog, maybe I’ll just have some turkey.
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