Scaling back or scrapping major Victorian infrastructure projects would help solve the state’s crippling debt problem, a leading rating agency has advised.
There have been “bombshell allegations” of multimillion-dollar rorts in Victoria’s Big Build, says Sky News host Jenna Clarke.
Cancelling Melbourne’s Airport Rail, Geelong Fast Rail, and winding back the Andrews government’s signature level crossing removal projects would also have a significant impact.
Analysts believe the projects, part of record spending included in the government’s Big Build, will see Victoria’s cash deficit remain large.
Despite introducing billions of dollars in new taxes in this week’s budget, just $3.7bn is expected to be wiped from projected debt levels, with net debt on track to hit a record $171bn by 2026-27.
A report by ratings agency Moody’s warned that the capacity of the state to deliver on its budgeted infrastructure spending was the key determinant of its projected debt burden.
Analysts say scrapping long-term projects, such as the Suburban Rail Loop, would be less likely. Picture: Luis Ascui
It has also warned of ongoing negative pressure to Victoria’s Australian low credit rating of AA, with no expectation the state’s debt burden will stabilise before 2028.
Moody’s lead analyst John Manning said axing major projects including Airport Rail and Geelong Fast Rail would have “an immediate impact on the debt projections for the state.”
“If they were to be removed, you’d obviously be looking at a significant amount less borrowings over the forward estimates,” he said.
“The large infrastructure that’s debt funded is the primary lever to make a large and significant change.
“However, that’s a balancing act as the state looks to balance the implications of spending in infrastructure that is enabling for the economy in a broader sense, to enable economic growth to flourish in the state, and pulling some large projects for the sake of minimising the debt profile.”
The major projects are currently on hold while subject to a Commonwealth review of infrastructure investment.
Axing major projects including Airport Rail and Geelong Fast Rail would improve the state’s debt position.
The government is pushing ahead with the controversial Suburban Rail Loop, which is not subject to review, despite concerns over the estimated $120bn price tag.
It is already more than double the original estimate with industry sources understood to have raised concerns about potential cost blowouts by 2035 when the first stage is expected to open.
Mr Manning said there would be less incentive to axe the long term project, given the total cost will be spread out over decades.
“The SRL is very long term, while the costings on that are estimates at the moment, and they are well over $100bn, that’s effectively not in the forward estimates, because it’s quite a long way away,” he said.
The government is hopeful the estimated $34bn cost of the first stage of the project will be split between the state, the Commonwealth and value capture.
About $12bn has so far been committed by the state government over a 14-year period, while the Commonwealth has committed just $2.2bn.
Mr Manning said delaying projects would also have an immediate benefit for the state.
“Over the immediate term, the savings and efficiency measures that were introduced in the budget were strong,” he said.
“But such is the underlying inflationary impact and expectation of rising interest rates impacting the budget over the four estimates, they really are pointing to a weaker profile over the next four years.”
Deputy opposition leader David Southwick said the Andrews government needed to “stop the blowouts, stop the rorts and stop the waste on major projects”.
“Major projects must be managed in a common sense way that prioritises the critical infrastructure Victorians need first,” he said.