Premature announcements from politicians looking to win votes are the number one culprit for $28 billion in overspending on transport infrastructure in Australia over the past 15 years, according to a new report.
A report released this week by the Grattan Institute finds that Australian governments spent $28 billion more on road, rail and bridge projects than they initially told taxpayers they would spend, in the 15 years since 2001.
The report looked into all 836 projects undertaken by governments with a value of more than $20 million, and found cost blowouts accounted for roughly a quarter of overall spending on these projects.
Two road projects – WA’s Forrest Highway between Perth and Bunbury, and NSW’s Hunter Expressway – were singled out for costing more than five times, and nearly four times what politicians initially promised, respectively.
Report author Marion Terrill said premature announcements from over eagre politicians are “the biggest culprits” causing the cost overruns.
“While only 32% of projects were announced early, these projects accounted for 74% of the value of cost overruns over the past 15 years,” Terrill wrote on October 23.
“Cost overruns are rarely analysed from the first funding promise, yet once politicians announce a project, they and the public treat the announcement as a commitment, and two thirds of these projects end up being built.”
Terrill believes both sides of politics can share the blame for these errors, despite the fact that all main parties “have committed to sound planning of infrastructure, and to making decisions with broad social benefit”.
“Yet in practice,” Terrill wrote, “they continue to promise projects that Infrastructure Australia has not evaluated or has already found to be not worth building.”
She said the report was yet another example showing governments should not commit money to transport infrastructure before proper evaluation has taken place.
The report also recommends that governments should have to report to the public after a project is completed, revealing how it performed against the cost-benefit estimates which led to the original decision.
“Governments can also improve project assessment methodologies, collect and publish data that would enable cost estimators to learn from past experience, and not spend contingency funds on add-ons that are poor value for money,” Terrill said.
“At a time of declining private investment and historically low interest rates, when many politicians and commentators are calling for more transport infrastructure spending, cost overruns are a vital public policy issue.
“Transport infrastructure has great potential to ease traffic congestion and lift productivity, but without a curb on politicians’ premature promises, it will remain the bluntest of economic instruments.”