Oz Blog News Commentary

North East Link

December 5, 2017 - 11:55 -- Admin

The North-East Link Project in Melbourne seeks to connect the Western Distributor with the Eastern Freeway. There is much to this project – including a widening of the already-jammed Eastern Freeway – but the biggest feature of this project is its cost. Namely, $16.5b. Some claim the price could go as high as $21b.


This is, by far, the most expensive road transport project in Victorian history. Like most major recent transport infrastructure proposals, there seems to be no cost-benefit analysis that supports the project. If I am wrong please point me in the direction of one.


Arguments for the project include the fact that (i) there is currently heavy congestion due to trucks in local roads around Heidelberg (I live nearby and can verify this), that trucking demands are forecast to grow strongly over future decades (also true) and that the planned 5 km tunnel under the Yarra River will avoid major environmental damages. There have been some qualitative estimates of time savings.


I like the last point but don’t like the huge associated costs being incurred without any overall cost-benefit analysis. It is just hard to get your head around a $16b cost. If I capitalize it at a 4% discount rate over an unending time horizon that is $640m annually forever. The time and inconvenience costs that the project seeks to avoid must be large. Moreover, will the project remain viable for long. The Eastern Freeway and even the link to Eastlink are now already heavily congestion as is the Western Distributor. Even with widening works completed and set to be initiated, there are doubts about whether this project will be an effective one longer-term.


If the project is “essential” then the primary reason for it must be the massive population growth that Melbourne is forecast top experience up to 2050. The immigration-driven population by that time will be something north of 10 million. I think it is important to recognize these costs as an implication of trying to derive benefits from a larger policy-driven population.