Almost $4bn more for Victoria’s contentious Suburban Rail Loop to be included in federal budget

The federal budget will include another $3.8bn for the Suburban Rail Loop, Melbourne’s controversial and costly 90km public transport project.

Prime minister Anthony Albanese will announce the additional funding alongside the Victorian premier, Jacinta Allan, on Friday ahead of the 12 May budget and as early campaigning for the state election heats up.

The state opposition leader, Jess Wilson, has committed to pausing construction if the Coalition wins in November, after years of controversy about the massive underground rail project, to run 90km between Cheltenham in the south-east and Werribee in the south-west, and stopping at Melbourne airport.

The new funding, to be delivered over the four-year forward estimates period, brings total federal government contributions to more than $6bn.

The two governments had been locked in negotiations for months over billions more from Canberra. State government sources said a “live option” being considered was a commitment of $9.3bn over a decade.

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State Labor has already committed about $11.8bn for the first stage of the loop, known as SRL East – a 26km stretch of tunnels between Cheltenham and Box Hill – and it has signed $13bn worth of construction contracts.

Victoria’s Suburban Rail Loop, a 90km proposed underground railway line running between Cheltenham in the south-east and Werribee in the south-west. Illustration: Victorian government

This includes two tunnelling contracts worth $5.3bn and $6.7bn, with a John Holland-led consortium, TransitLinX, to fit out the tunnels, build the track and install the signalling and other operating systems. Two more contract packages will be finalised in 2026 and 2027, according to Tuesday’s state budget.

Upgraded to priority project by Infrastructure Australia, Suburban Rail Loop was first promised by Daniel Andrews in the lead-up to the 2018 election. It has been the subject of repeated criticism since, including over its origins, the veracity of its business case and the total cost.

Albanese called the project “a gamechanger” for Melbourne and Victoria.

“Ensuring Victorians can get into greater Melbourne and across suburbs, rather than having to go into the CBD then back out, helps speed up travel times, get cars off the road and increases opportunities for businesses in Melbourne’s east,” he said.

Allan said Victoria needed federal support to provide for a growing population.

“The Suburban Rail Loop will slash travel times and cut congestion for busy families.”

The 2021 business case, which deals with both the SRL East and SRL North sections of the project, estimated the eastern section would cost up to $34.5bn and would be completed by 2035. It had forecast about 71,000 daily passenger trips on SRL East in 2036.

The business case did not deal with the final stage of the project, between Melbourne Airport and Werribee.

An analysis by Victoria’s independent parliamentary budget office a year later estimated the cost of constructing the first and second stages of the mega project would reach $125bn by 2084-85.

A 2023 ombudsman report, meanwhile, found the project was the brainchild of a former ministerial staffer who had taken up a role in the public service and worked on its early stages “in secret” with a small team of external consultants, sidelining experts in the transport department.

The project has been credited with helping Labor politically in Melbourne’s eastern electorates, areas to benefit first. But within the state Labor caucus, some MPs have expressed concern about the massive cost and the decision to leave construction in the western suburbs, home to safe Labor seats but less transport infrastructure, to later decades.

The federal opposition this week accused Labor of axing the beleaguered inland rail project to redirect funds to Suburban Rail, to help Labor’s chances at the November election.

The Coalition went to the 2018 and 2022 state elections vowing to scrap the Suburban Rail Loop.