Shadow Assistant Treasurer Andrew Leigh is a very good economist, so I hope he is encouraging his colleagues to wait for and fully scrutinise the Cross River Rail business case being delivered in June, before the Federal Opposition commits to the project. I am a little concerned that he hinted yesterday that the Opposition will support Cross River Rail as a matter of course (see the Brisbane Times report). Cross River Rail will be a mega-project, at least $5-10 billion in capital expenditure, possibly $10-15 billion ultimately. As a mega-project, it will have mega-risks, of huge cost blowouts and demand shortfalls, for example, a point I made last Friday to a seminar on cost-benefit analysis organised by Griffith’s Economic Policy and Analysis Program at Griffith’s Southbank campus. As is becoming ritualistic among economists and infrastructure experts, I referred to the classic Bent Flyvbjerg book Megaprojects and Risk:
“At the same time as many more and much larger infrastructure projects are being proposed and built around the world, it is becoming clear that many such projects have strikingly poor performance records in terms of economy, environment and public support. Cost overruns and lower-than-predicted revenues frequently place project viability at risk and redefine projects that were initially promoted as effective vehicles to economic growth as possible obstacles to such growth.”
I would hope that anyone involved in infrastructure decision making in Queensland has read this book, so they can read the Cross River Rail business case with a more critical eye. They need to think about whether the risks have been fully elaborated and whether the estimated benefit-cost ratio is credible and gives them comfort the project stacks up. As I noted at the seminar last Friday, the BaT tunnel business case should have given the previous government little comfort in the economics of the project, given the relatively low benefit-cost ratio of 1.16 (see my September 2014 post on this issue).
Also, infrastructure decision makers should consider whether cost-effective alternatives could be adopted. In the case of Cross River Rail, alternatives I would be exploring would include larger differences between peak and off-peak public transport fares, to encourage greater off-peak travel, and staggered starting times and more flexible working hours for Queensland public servants working in the Brisbane CBD, and possibly relocating many of them to areas outside the CBD. State Government public servants are undoubtedly a major contributor to the peak hour demands for public transport into the CBD.
Finally, I will reiterate my call for all business cases for publicly-supported projects to be made public. This is absolutely essential for transparency and better decision making. See my post:
A modern classic for infrastructure experts