The Australian government will slash 50 high-risk infrastructure projects across the country with $7bn in savings put toward other “nation-building” projects, the infrastructure minister, Catherine King, says.
The $120bn infrastructure pipeline was facing $33bn in cost blowouts and delays, an independent review released by King on Thursday found.
The minister flagged that a number of the former Coalition government’s plans were undeliverable due to cost blowouts and a lack of clear benefits.
She said the review painted a “sad and frankly sorry” picture regarding the health of the infrastructure investment pipeline. She said the former Coalition government had engaged in “economic vandalism” by announcing projects it knew it could not deliver.
The shadow infrastructure minister, Bridget McKenzie, said she completely rejected King’s characterisation, adding the minister and her response to the review had been “hyperpartisan”.
The Labor government on Thursday also guaranteed $27bn for strategic freight and road safety corridor upgrades including the Newell, Princes and Bruce highways.
The changes mean commonwealth funding will be allocated to an overarching project, or “corridor”, instead of the states and territories coming to the federal government for each individual stage of the project.
For example, all existing upgrade projects to the Pacific Highway in New South Wales are now lumped with $3.5bn in commonwealth funding.
More than 400 projects are expected to be completed, or substantially developed, over the next decade, King said.
The independent review, announced in May and delivered to the federal government in August, recommended 100 yet to be constructed projects proceed, while 82 projects should be axed. A further 56 projects identified as risky were expected to proceed, but should be assessed prior to delivery, the review said.
The federal government announced on Thursday it had identified 50 projects, totalling around $7bn in commonwealth funding, for the cutting-room floor, including Victoria’s Geelong fast rail, Sydney’s M7-M12 interchange along with a number of commuter car park upgrades promised.
Seventeen projects, totalling $3.5bn, across NSW will be axed, while 12 projects, costing $2.6bn, in Victoria and nine, costing $230m, in Queensland face the chop.
King said some of the projects the review recommended be dumped were still considered “priority projects” after negotiations with the states. Funding was rolled over into corridor funding.
The minister said the cuts were not a “savings exercise” and that no commonwealth funding would be taken out of the $120bn pipeline.
“We have honoured that – all states and territories have maintained their funding in the pipeline that they previously had. Not a single dollar less for any state or territory,” King said on Thursday.
King said the tough decisions were necessary to create jobs and grow the economy while not adding to inflationary pressures.
“From now on the Australian government’s investment in infrastructure will focus on productivity, sustainability and liveability,” King said.
The International Monetary Fund earlier this month urged the Australian government to cut or delay its $30bn a year spending on infrastructure projects, saying it should aim for “a more measured and coordinated pace”.
Brendan Rynne, KPMG’s chief economist, agreed the Labor government’s overhauled infrastructure program was “necessary” to smooth out the pipeline.
“What the government’s done here is incredibly necessary, but it’s also fixing up some of the problems that it created itself through overstimulating the economy through Covid,” Rynne told Guardian Australia.
“What it’s going to do is ensure that we don’t get unintended inflationary spikes generated by the government through the timing difference or timing peaks associated with poor planning of projects.
“It’s certainly not a silver bullet to help pull inflation back down to the RBA target band tomorrow.”
But the announcement has already faced tough criticism from the opposition and the states.
McKenzie accused the federal government of picking and choosing its favourite projects, while ignoring the needs of local communities.
“This infrastructure prime minister, Anthony Albanese, is yet to actually deliver anything and their biggest announcement thus far in this portfolio in 18 months is to announce a review that doesn’t give certainty at all,” she said.
“All this review does today is reduce the 800 projects [King] was complaining about to 750 and also, it means that 250 projects within the pipeline face further uncertainty as they have to wrestle the state governments to see if they’re going to actually be delivered.”
The Victorian premier, Jacinta Allan, said it was her expectation that federal funds from any cancelled projects would be spent on other infrastructure in the state.
“We have a big infrastructure pipeline here in Victoria and for too long we’ve had to go it alone,” she told reporters, citing the soon-to-be-completed $12bn Metro Tunnel, which did not receive any federal funding.
Meanwhile, the NSW government expressed “disappointment” after the federal government cut funding to a project providing better access to the upcoming Western Sydney airport.
The Queensland treasurer, Cameron Dick, said the “cuts” will mean “Queenslanders will be forced to wait longer in traffic, drive on more dangerous roads and suffer from a higher cost of living”.
“My message to the federal minister is simple: do not try to rope us into your bad decisions,” he said.
On Tuesday, King revealed the federal government would be returning to a preference of 50-50 funding arrangements on infrastructure projects with the states and territories.
Additional reporting by Tamsin Rose and Andrew Messenger
