Brisbane’s under-construction inner city subway system Cross River Rail has been identified as an example of a risky megaproject (a $5bn+ project) subject to cost blowouts by the highly respected Grattan Institute in its latest report The rise of megaprojects: counting the costs. Cost blowouts we already know about (e.g. the problem with Boggo Rd station) could amount to an additional $900 million, as reported by the Courier-Mail in August, and there is speculation the cost could blow out by several billion dollars more (e.g. see this February QEW post).
In addition to highlighting cost overruns for several megaprojects across Australia, including CRR, Grattan notes (on p. 12):
Projects conceived pre-pandemic are likely to suffer benefit underruns
CRR certainly falls into this category as there is the possibility public transport use remains below pre-COVID levels for a while yet and does not grow at previously projected growth rates. Grattan notes there are two reasons why projects conceived pre-COVID are likely to have lower benefits than previously estimated (from pp. 12-13):
- “Population growth has fallen off a cliff”
- “Work and travel patterns are likely to be different post-pandemic” (i.e. because more people are working from home or driving, riding, or walking to work)
Together, in my view, the cost blowouts and benefits shortfall could drive the benefit-cost ratio for CRR below 1, meaning the project doesn’t stack up, as many observers have long suspected.
Releasing a report on CRR last month, the Australian Institute for Progress (AiP)* called for a Commission of Inquiry to investigate CRR in its media release Cross River Rail: privatisations, cost over-runs, and no patrons:
CRR is the largest and most complex state government infrastructure project. It involves original expenditure of $6.26 Bn, which with known current cost over-runs could now be as high as $7.16 Bn.
The report identifies a number of planning and governance risks and failures which provide lessons for the future. These risk a cost blowout which will crowd-out other much-needed infrastructure.
The consultants call for an immediate review, which we believe should have the powers of a Commission of Inquiry.
Certainly, there are big questions to answer regarding CRR. Recent reports by the Grattan Institute and AiP suggest the Government should immediately review the project and assess whether it will still be good value for money for Queensland taxpayers.
*Regular readers may recall I co-authored an AiP commissioned report on the Queensland budget in September.