Passenger Rail

Cancelling light rail could kill Canberra’s credit rating: Report

Infrastructure Partnerships Australia boss Brendan Lyon has warned the Australian Capital Territory’s AAA credit rating would be downgraded if the Capital Metro light rail project is cancelled after the territory election later this year.

The ACT Liberals say they will cancel the light rail project if they overthrow the incumbent Labor Party at the election, scheduled for October 15.

A contract has already been awarded for the project, to a consortium including Pacific Partnerships, CPB Contractors, John Holland, Mitsubishi Corporation, Aberdeen Infrastructure Investments, Deutsche Bahn International and CAF.

An estimates hearing in Canberra last month revealed taxpayers would be liable for a quarter-billion-dollar bill if the project is cancelled now.

Lyon has warned a cancellation would remind the international market of the disastrous East-West Link saga in Victoria, where newly-appointed premier Daniel Andrews cancelled a road project, leaving taxpayers with a roughly billion-dollar bill (and no road to show for it).

Perhaps more important than wasting money now, however, would be the loss of the ACT’s perfect credit rating, Lyon has said.

“Any scheme to dishonour Canberra’s light rail contract will pose large compensation and reputation costs,” Lyon was quoted in the AFR this week, “and could quite foreseeably see the territory stripped of its AAA.”

Lyon’s comments in the AFR came a fortnight after he responded to the estimates hearing by warning the ACT Liberals to cancel their plans to quash the project, should they win the tightly-contested election.

“Axing Canberra’s Capital Metro would see taxpayers pay a quarter of a billion dollars, for absolutely nothing,” Lyon said on June 28.

“With a legal, valid and binding contract in place for the Capital Metro, it was never responsible to pretend that sovereign risk would be anything other than very costly to Canberra.

“The Canberra Liberals threat to axe the light rail contract was always irresponsible,” he continued.

“There are quite correctly very large costs and serious consequences for governments that don’t pay their bills or follow contracts.”

In February – two months before the contract was signed – Capital Metro minister Simon Corbell told Rail Express the light rail line was “a once in a lifetime opportunity,” being threatened by the potential of “a reckless cancelling of the contract.”

5 Comments

  1. Of course building an expensive folly which will receive minimal use and run at a massive loss will only enhance the ACT’s credit rating!

  2. Public transport is never folly and Canberra has no rail system except for the little bit that is owned by NSW trainlink. Just like in Sydney, Adelaide and the Gold coast, it will get significant use and be warmed to by locals once they can use it.

  3. No I called a high speed rail project silly and wasteful. What is happening in Sydney and Melbourne with new mega rail infrastructure projects is amazing. Light rail in Canberra will be great just as it has been on the Gold Coast. High speed rail is not public transport it is an overpriced luxury. Rural areas need rail systems for freight to move the huge volumes of product produced.

  4. As for being a massive loss, roads don’t make *any* money, at all. Unless they’re toll roads, which as Sydney and Brisbane have shown, can be devastating loss makers

    As Craig said, same arguments were used in Sydney, Adelaide and the Gold Coast, now look