Subjects: Auditor General's damning report into Westconnex; Perth Freight Link.

ANTHONY ALBANESE: Thanks for joining us. I wrote to the Auditor General in 2016 asking for an audit of the Government’s decision to forward advance funding for the Westconnex project. It is the latest example of where the Government has got itself into difficulty by ripping up its own policy that it took to the 2013 election saying that they would have proper planning and approval by Infrastructure Australia for any project of value above $100 million.
This latest report now joins together with the report into the East-West Link in Victoria, to show just how hopeless this Government has been when it comes to handling of public funds on infrastructure projects. What the Auditor General has found, and I quote here, is:
The Westconnex project had not proceeded fully through the establishment processes to assess the merits of nationally significant infrastructure investments prior to Australian Government funding being committed.
This situation was identified in departmental advice to decision makers prior to decisions being made.
What’s more, it says quite remarkably here that milestone payments that were forwarded to the Government as part of the $1.5 billion grant and the $2 billion concessional loan for this project; the milestone payments were agreed to in terms of the criteria after the respective event had already occurred. So what you had was the Government forwarding money to the New South Wales Government on the basis of milestones after the event had occurred. That’s according to the Auditor General’s report.
Now, what the point of milestone payments is is to ensure that criteria are met, the project’s half finished, the money is ready to be spent, and in no case did that occur in terms of the four considerable payments of $1.5 billion - $500 million of which was forwarded well before construction started, before any planning had been done into this project.
This is a project that when it was announced was said to cost $10 billion. It now costs $17.6 billion and rising. And what’s more, it has undergone a whole series of changes - at least a dozen separate changes as to where the tunnels would be built, where the tunnels will come out, the latest of which was just two months ago and that was after the Camperdown-Glebe Interchange was abandoned as part of this project. And that was after the entire $1.5 billion has already been forwarded from the Government to the NSW Government in the form of grant funds. The concessional loan has already been, of the $2 billion, more than $400 million at least, has already been provided for that concessional loan.
This is a Government, whether it’s the East-West Link, Westconnex or whether it be the disastrous Perth Freight Link that doesn’t go to the port, that simply supports projects that don’t meet its objectives and in the interests of Westconnex, the project was originally designed and when we were in office - we provided $25 million for proper planning to occur, and I note that the Auditor General has noted that in terms of our conditions that we put forward, on page 22 of the report, the Labor Government attached the following preconditions to any commitment, which was the development of a full business case and its submission to and assessment by Infrastructure Australia and the design includes suitable connections to the Sydney CBD and Port Botany and no tolls being imposed on currently untolled existing roads, that is the existing M4. Now when the residents of Western Sydney realise that on a road that they currently travel on they are going to get a new toll on that old road, not on new sections, but on the old road, then I think there will be a great deal of frustration from the people of Western Sydney. This is a project that will be recorded as an example of bad planning. We should do the planning first, then the funding and construction.
REPORTER: The commitment that you gave for the $1.8 billion and the criteria that you just said there, are those two related – the $1.8 billion and the criteria?

ALBANESE: Absolutely and the report makes it very clear. In section 2.3 on page 22, a further $1.8 billion commitment toward the project was included in the May 2013 Budget, but with the bulk of the funding profiled for provision beyond the 2018-19 financial year. The Labor Government also attached the following preconditions to that commitment – development of a full business case, design includes suitable connections to the port and the CBD and no tolls imposed on currently untolled existing roads. My colleague the current Minister for Urban Infrastructure, that’s the inconvenient fact for him. We indicated that we would be prepared to provide some funding in the future but a range of conditions, including getting the project right. At the moment the project doesn’t go to the port., it doesn’t go to the airport, it doesn’t go to the CBD and it costs $7.6 billion more than was originally envisaged and there is new tolls on old roads. That’s the problem here – it’s that the criteria that were originally envisaged and this arose out of an Infrastructure NSW report where Nick Greiner was the chair, said that the number one priority for Sydney was getting access to the port. The project, which currently comes up at St Peters with an interchange, doesn't take freight to the port.
That was the whole purpose of that project. This is a project that's got a life of its own. It might be the only project in history in which people have started digging a hole at one end without knowing where it was going to come up, and indeed have changed the destination a number of times whilst that hole has already been begun at the end of the M4.
REPORTER: The Government says that the $1.8 billion commitment that you gave, it's in the report on page 15, shows that Labor was hypocritical on this.

ALBANESE: No it shows that we're consistent. We put criteria on funding. We say we'll fund good projects, but we'll make sure the planning's done right, we'll make sure it achieves its objectives, we'll make sure there's value for taxpayers and that is what we did.
That's why what we didn't do was just give a blank cheque for a project where we didn't know where it was going, where we didn't know what the final cost would be. So we ensured, as the report says, the provision was there. We provided $25 million for planning essentially on what the criteria originally was, which is how do we deal with the issue of freight traffic to the port.
We provided that money to the NSW Government. Before that planning was even completed, what you had was money put in the 2014 Budget by the Coalition Government and money forwarded in 2014 before there'd been any assessment, before there was a business case. As I said, just at the end of last year, they changed the criterion again and instead of having three exit points for this road at Rozelle, at Camperdown-Forest Lodge, and at St Peters, they changed that to just two and they changed the whole structure of what stage three, which is a critical stage, would be of the project.
Now good planning requires you to actually get all of that work done first and then the funding should flow. What this report confirms is that the funding was flowing and indeed has been fully paid over by the Commonwealth Government without any of that occurring. It’s similar to other projects; East-West where $1.5 billion was forwarded for a project that hasn't gone ahead; Perth Freight Link, a project currently the subject of controversy in the lead up to the March 11 WA Election, which stops 3km short from the port. Now you can't deal with freight to the port if the road that's supposed to fix the problem stops 3km short, and what's more, that port is at full capacity. What's required is the Outer Harbour to be developed.
REPORTER: In terms of value for money though, Mark McGowan is promising to break the contract with those contractors that have signed on to Roe 8. Is that a good use of money?

ALBANESE: The fact is that this is  not a good use of money for Colin Barnett. This project was announced in the 2014 Budget. It's now 2017 and just prior to the election being held where this project, it's been made very clear for some period of time, would not go ahead under the Labor Government. They've rushed to sign some contracts for one section of the Roe 8 project; a project that had been abandoned previously because it doesn't achieve its objectives and because of the environmental consequences for the Beeliar wetlands. So the Barnett Government has been very irresponsible in this and Mark McGowan has made it very clear that his priority to deal with urban congestion in Perth is METRONET.
It's only Labor that has extended the rail way line down to Mandurah, extended it north up to Joondalup. It is Labor in Perth that are the party that have delivered infrastructure; whether it be that public transport or of course projects like Gateway WA, the widening of the Great Eastern Highway, the other projects like the Swan Valley Bypass now called Northlink, are all projects that were funded primarily by the Federal Labor Government.
REPORTER: In relation to Westconnex, has the Coalition Government wasted money on this project, and if so, how much?

ALBANESE: It's very clear that what the Government has done here is forward money for projects well before that money was required. So that is money foregone. In terms of the loan, the audit report indicates that there are many hundreds of millions of dollars of opportunity cost for the fact of that concessional loan and that there was an underestimation of what the difference would be essentially between the concessional loan and a commercial loan. Because it's indicated in this report that there's 15 years before the interest has to be paid back in this report, it might be 12 years. I think it's 2027, but there's a very long period, indeed. And indeed the report indicates that that wasn't really necessary.
This is a project where it's been done in the wrong order. The lesson to be learned here, is the lesson that Labor put in practice when we were in Government: get the planning done right, get the Infrastructure Australia approvals and then proceed with the project.
The tragedy here is that money was taken away from projects that were ready to go, like the Melbourne Metro, the Cross River Rail project and other projects around Australia, to be given to a project that wasn't ready to go, that I'm sure will still continue to see design changes to it. It doesn't make sense to essentially be doing the planning as you go, as you're doing construction and that's what we've seen with this project. Thanks very much.