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$34bn gone: Spending blowout on Govt megaprojects

·2-min read
The entrance of the Sydney Westconnex at Five Dock. A large machine used to create holes for tunnels. A truck removing dirt from a large tunnel.
Australian governments spent $34 billion more on transport infrastructure than initially estimated over the past 20 years (Source: Westconnex)

Government predictions for the cost of massive infrastructure projects are often extremely out of step with the final price, often costing 49 per cent more than originally forecast.

According to Grattan Institute in 2015, the plan for the Brisbane Inland Rail project was estimated to cost $9.9 billion, with the ‘worst case’ scenario estimated at $10.7 billion.

However, fast forward to today and the Government said the project is now expected to cost $14.9 billion - 46 per cent higher than the original estimate.

The worst case scenario in that 2015 case was way out, and recent Grattan Institute analysis shows that proposals for big transport projects in Australia are “way out way too often”.

Grattan said its analysis shows that over the past 20 years, on average infrastructure projects cost 49 per cent more than initially estimated.

“Even before the megaprojects era, cost overruns were a megaproblem,” Grattan said.

“Over the past two decades, Australian governments spent $34 billion more on transport infrastructure than they first told us they would,” Grattan said.

The problem, Grattan said, is that with governments fast tracking transport projects to drive an “infrastructure-led recovery” they may be rushing to build before thinking ahead to what the nation may need in the future.

For example, building more access to a city CBD may not be necessary if more people are able to work remotely and the money could be better spent elsewhere, like updating the NBN.

As it stands, there are no official penalties associated with a project going over budget.

How do we fix the problem?

Grattan suggests a national database may be the way forward, and that idea has a lot of support.

In fact, road experts, the Productivity Commission, and the Department of Infrastructure, Regional Development and Cities have all recommended cost estimators have access to data that could allow better price forecasting.

“Australia needs a national database on major projects. Data on completed projects should include the eventual cost of each component of the project, as well as the cost estimates at different stages,” Grattan said.

“Cost estimators are flying blind if they can’t properly incorporate past experience into their estimates.”

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