Inland Rail axed, but Labor's pet railway projects are set to squander billions more

Do Australian politicians ever learn? You would think that with so much money already down the drain on dud rail projects, our politicians would have learnt their lesson and become responsible with their infrastructure spending. The reality is that, when politicians talk about "nation-building" infrastructure projects, taxpayers should watch out.

The decision to stop building the Inland Rail line from Melbourne to Brisbane was announced before the Budget. Essentially, after spending over $30 billion, the Commonwealth Government is going to stop the project a little over halfway (north of Parkes), resulting in a super-expensive railway to nowhere.

That won't be the end of the matter. The line will now generate minimal revenue and suffer tens of millions in annual operating losses. Railway operator, Australian Rail Track Corporation (ARTC) will almost certainly need a Commonwealth bail-out, and many private businesses and local councils will also have wasted a lot of money. It is a financial disaster of similar order to Snowy 2.0.

Inland Rail had been Australia's largest freight rail infrastructure project, designed as a 1,700 km freight corridor connecting Melbourne and Brisbane through regional Victoria, NSW, and Queensland. It had been supported by all Commonwealth Governments over the past 25 years but was mainly regarded as a pork-barrel project for National Party electorates in Central-Western NSW. It had been championed by now One Nation figure, Barnaby Joyce.

The price tag to completion had blown out from about $10 billion to more than $45 billion, so the Albanese Government (rightly) decided to pull the plug. Infrastructure Minister Catherine King quoted cost assurance work completed by ACIL Allen , confirming that "the cost estimate now exceeds $45 billion to deliver the full inland rail project from Melbourne to Brisbane." The government will now focus on completing the southern section between Beveridge, north of Melbourne, and Parkes by 2027, with the Parkes-to-Brisbane stretch stopped indefinitely. The line now won't reach a major port at either end, which was its main justification.

The most challenging and expensive part of the line was always going to be from Gowrie (northwest of Toowoomba) onwards, where areas of floodplain and steep terrain (requiring extensive tunnelling) would be encountered. Some advocates even suggested extending the line to the port of Gladstone as an easier-built alternative to the Brisbane route. In recent years even the most ardent supporters of the scheme had become resigned to the fact that the section from Gowrie to Brisbane was unlikely to be ever built.

The Minister now claims that the truncated line "will enable double-stacked freight trains to travel between Melbourne and Perth, via Parkes". Even this claim is imaginary. A simple glance at a map shows the folly of running freight trains from Melbourne to Perth via a line initially going in almost the opposite direction, firstly north-east towards Albury and Sydney, then turning more northerly for Parkes (meeting the existing Sydney to Perth line). It would then follow that line west to Broken Hill and then south-west to Crystal Brook (near Port Pirie SA, where it joins the main line from Adelaide to Perth). This all more than doubles the journey length compared with the direct route to this point from Melbourne via Adelaide. Sending heavy freight along such a roundabout route simply won't be economic.

To date, Inland Rail has been funded off budget through loans to ARTC. Interest on these loans will continue to build, especially in the absence of significant revenue from the line. It is said that ARTC will need a big bailout to avoid bankruptcy, which will then impact the federal budget deficit. According to the company's annual reports for 2025 and 2024, ARTC has already been experiencing big annual operating losses ($560 million and $760 million respectively ).

Governments had been pre-warned multiple times that the Inland Rail project was uneconomic but went ahead anyway.

Infrastructure Australia gave the project an equivocal cost-benefit assessment . It said that:

...the proponent's stated benefit-cost ratio is 1.1 using a 7 per cent discount rate" but also identified "a number of risks which could impact on the economic viability of the project".

The Bureau of Transport and Communications Economics in an analysis published in 1996 concluded that:

… "from our limited analysis, the proposed inland railway emerges as an investment of uncertain economic merit….Also unclear from our results is whether the inland railway makes more economic sense than investing a similar amount in the existing coastal railway.

It was obvious at the time that duplicating the Newell Highway (at a small fraction of the cost) was a far better alternative and could be used by motorists as well as for freight. There was already an existing freight line from Melbourne to Brisbane via Sydney, which many also felt should be upgraded instead. The Melbourne to Sydney rail link is currently a loss-making basket case with rail accounting for just two per cent of total freight, and nearly all the rest going by road down the Hume Highway.

A submission to the Independent Review of ARTC Inland Rail prepared in 2022 stated that the 2015 Business Case was developed with the predetermined purpose of making the project look viable. Inland Rail was claimed to have significant flaws, which were exposed during the Senate Enquiry into the Management of the Inland Rail project by ARTC. The initial estimated cost at commencement of construction in 2018-19 was only $9.3 billion. A Senate Enquiry reported on ongoing concerns about the cost of the project. The final Committee report indicated an increase in cost from $4.7 to $14.3 billion, with predictions that it would exceed $20 billion.

The financial analysis found the project "would not generate enough revenue to provide a return on its full construction cost" but would be "cash flow positive once operational". This was misleading according to the submission.

Based on current planning, it will take at least 10 years to build the railway. Interest on the ARTC loans will multiply rapidly over those years, and it will take another 10 years of freight traffic to generate enough revenue to start repaying the loans. The venture may bankrupt ARTC. The Business case states that the project will take 35 years to break even. However, this is against the cost estimate of $9.7 billion, not the current projected cost of over $20 billion.

In the wake of the dumping of the Inland Rail project, almost all prominent National Party figures associated with the project (from John Anderson through to Matt Canavan, as well as Barnaby Joyce) have been in the media bemoaning its demise. They must all have hides thicker than a Rhinoceros!

Australia has form in respect of funding expensive rail projects known to be uneconomic.

The most prominent such project was the Alice Springs to Darwin Railway. The Commonwealth, SA and NT governments put up a total $560 million towards the $1.1 billion cost, with a private consortium committing $740 million. The all-up cost back then (in 25 years' ago prices) was $1.3 billion . The FreightLink consortium was contracted to build and operate the line with ownership to eventually transfer back to public hands after 50 years.

David Hill, then Chief Executive of NSW Rail, conducted a study on the costs and benefits of completing the line, and concluded that the investment "would constitute a major misallocation of the nation's resources". The Bureau of Transport Economics also investigated the potential of the line and recommended instead that the highway be upgraded . Other critics of the project said it was destined to be a white elephant, with insufficient demand for domestic and export rail freight to cover operating expenses.

The project indeed turned out to be an economic disaster. After failing to make a profit and later being placed in voluntary administration, FreightLink agreed to sell its ownership. Since 2008 it has been owned by US railroad company Genesee & Wyoming Inc, which purchased it for a mere A$334 million .

While Labor has dumped Inland Rail, it is instead pouring billions into its own favoured rail projects. The 2026 Budget provides funding for the following rail projects:

• Melbourne's Suburban Rail Loop East – an additional $3.8 billion for the project. This brings the Federal Government's total investment to $6 billion.
• National rail freight network upgrades – $1.75 billion in additional funding for the Australian Rail Track Corporation (ARTC) to support the maintenance, upgrade, modernisation and resilience of the national freight network.
• High speed rail – Continued funding ($229.6 million over three years from 2025-26) for development works for first stage, from Newcastle to Sydney.
• Melton Line electrification – $76.4 million for the electrification of the rail line in Victoria.
• Fuel incentive scheme – $55 million for the Transport Resilience and Capacity Kickstart (TRACK) program to promote use of rail freight in response to the fuel crisis.
• Sydney-Canberra rail corridor upgrades – $50 million (in addition to $25 million each from the NSW and ACT governments) to deliver upgrades to the rail network.
• National Freight Data Hub – $1.9 million to continue efforts to standardise accessible freight data.
• Supply chain – $1 billion in interest-free loans through the National Reconstruction Fund's Economic Resilience Program to provide cashflow relief to manufacturing and logistics businesses, including freight businesses, in critical supply chains.

Many of the rail projects being funded in the Budget are of dubious merit, though funding of maintenance and some improvements are clearly justifiable.

The Suburban Rail Loop (SLR), an estimated $34.5 billion project for the initial stages, is under a big cloud. Critics of the project have raised concerns regarding the overall expenditure, and point out that rating agencies have advised the heavily indebted Victorian government to rein in spending.

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 estimated the cost of constructing the first and second stages of the mega project could reach $125 billion by 2084-85.

Infrastructure Australia has also expressed doubts about the project.

Based on the information provided, we have low confidence in the cost estimate for SRL East, presenting a major risk to the SRL East project and the SRL Program as a whole. The Business and Investment Case (BIC) identifies that SRL North will not be fully complete until 8-18 years after SRL East opens, meaning the full benefits of SRL East, including increased patronage, will not be realised for many years. Industry-wide cost escalation since 2020 presents further risk and uncertainty. Due to the uncertainty in the cost estimate, it is likely the economic case for SRL East and SRL North is overstated, as any further increases to costs without extra benefits will reduce the benefit-cost ratio.

A high-speed rail line between Newcastle and Sydney has moved closer to being a reality, with Transport Minister Catherine King announcing an additional $229.6 million to lock in the design, approvals process, scope and cost for the project. The latest development funding is said to take the total government investment to date to $659.6 million before a single section of track is laid. The Sydney-Newcastle high speed rail is widely viewed as a possible first step to building a broader Brisbane to Melbourne Very Fast Train (VFT) via Sydney and Canberra. The full project would cost more than $150 billion.

The VFT is a proposal that gets trotted out every decade or so (often before an election), and PM Albanese is a long-time advocate. The Sydney to Newcastle stage is quoted as costing $61.2 billion overall, and the bill goes up to $93 billion, if the line goes on to the new Western Sydney International Airport. The government is looking for a private sector investor to pick-up part of the tab but there are widespread doubts that any part of the VFT line will be actually built because nobody will be prepared to fund such a super-expensive project.

The Grattan Institute has rubbished VFT proposals saying that:

Australia should dump the decades-old dream of building a bullet train from Brisbane to Melbourne via Sydney and Canberra, and we should be wary of expensive promises to upgrade regional rail. The east-coast bullet train advocated by the federal ALP would be an expensive folly: Australia's small population and vast distances make it unviable.

A less prominent Budget project is to upgrade the existing Canberra to Sydney rail link at a cost of $50 million from the Commonwealth and $25 million each from the ACT and NSW governments. The initial part of the 320-kilometre-long track to Sydney (until it joins the Sydney - Melbourne line at Goulburn) winds around hills and was built to 19th-century freight train requirements.

The rail trip to Sydney generally takes about 4 ½ hours and costs $29 to $55 for tickets. About 21 three-carriage passenger trains run each week in both directions and have good utilisation rates. The journey can take a lot longer, if the train gets held up behind a slow-moving freight train.

The stated aim is to get the journey time below four hours. A few years ago, Infrastructure Australia estimated that only one per cent of people traveling between the two cities (mostly tourists and retirees) used rail. This because the train is slow and unreliable, and the rail station is inconvenient for many.

Car and bus are the dominant modes of transport between Canberra and Sydney, and spending $100 million reducing the rail journey to four hours probably won't make much difference to patronage. There are no readily available data on the rail line's financial performance, but it almost certainly incurs large losses.

Deciding what to do with Australia's railway network has always been a dilemma. Australia's inheritance was of an extensive network of slow railways of several different gauges in need of modernisation. Many little-used lines have been closed over past decades, though on the other hand bulk rail freight has been vital to our mining and grains industries. Lines like the Trans-Australian Railway , completed in 1917, also still carry a lot of freight between major centres.

While I am opposed to waste, it is also obvious that rail has an important role to play both in alleviating urban congestion and taking large trucks off key interstate roads. There is merit in creating a viable Sydney to Melbourne freight rail service that would reduce the number of heavy trucks using the Hume Highway. Following the Inland Rail debacle this won't happen anytime soon.

Lessons from the past include the need to conduct rigorous independent cost-benefit assessments before undertaking major infrastructure projects, and (more importantly) to act on the findings. To this end, Infrastructure Australia should be given a more powerful role and be further removed from political influence.

A second priority should be to bring an end to "off budget" accounting by governments. Accounting standards prevent such practices in the corporate sector, but these standards do not apply to government. University of Wollongong professor Brendan Lyon said that governments should not be allowed to hide bad policy behind dodgy accounting.

The government has special accounting standards that allow public money to be spent 'off-budget', with assets then reported at an estimated 'fair value', not their cost". "The accounting standards for government require attention because they've removed political accountability for risky public expenditures and obscured the costs of policy and project failure.

Ultimate responsibility for the horrendous multi-billion-dollar waste in infrastructure projects lies with politicians and the voters that elect them. There is, for example, a widespread lack of appreciation of what a large amount of money a billion dollars (for example) is, but most of all there is general ambivalence to the waste of public money. There should be widespread outrage when a huge amount of money is wasted but in practice this never eventuates. Once their money is taken in taxes or via increased public debt, the public generally ceases to care.

It is widely appreciated by the experts that both the Suburban Rail Loop and the Very Fast Train are uneconomic and absolutely should not be built. Despite this, vast amounts of public money look like being wasted on these projects.