Cross River Rail Project

[Fares_Fair]

11:00 AM - 5 Mar 12 via Twitter

@CD_Track hello Campbell & welcome to twitter. Will Sunny Coast single line rail to 3rd largest growth area be priority for the LNP please?

[Stillwater]

Like Basil Fawlty in the Fawlty Towers television series, who had difficulty not mentioning the war when a group of Germans came to stay at his hotel, Mr Newman's Sunshine Coast LNP sitting Members must find it excrutiating not to mention the SCL during the election campaign.



Curiously, the Sunny Coast does not qualify as a 'region' in the royalties for regions scheme proposed by the LNP.

[SurfRail]

Here is my reaction to Mr Newman's interview.

[SurfRail]

IA won't say no, otherwise it wouldn't be on the "ready to proceed" list of projects of national significance.  The only question is "when", not "if".

Again I maintain that the cost of not building it, or of doing a half-arsed job and having to fix it later, will be dramatically higher than simply borrowing to build it.  The only reason Queensland's credit rating has degraded (by an infinitesimal amount) is because Queensland has actually been borrowing to fund projects for the good of the State.  No other state is game to make the investment Queensland has made in the last 10 years, in large part because they have not needed to deal with:
- massive population growth
- drought-proofing on large scale
- chronic under-investment in rail

To say the State can either have low debt or CRR is a false dichotomy.  You either borrow to fund a productive asset with a positive BCR, pay down the debt and end up with minimal or no debt in future and a good asset, or you just pay off debt for the sake of having no interest repayments and end up in the same position with no asset to show for it.

[Fares_Fair]

IA won't say no, otherwise it wouldn't be on the "ready to proceed" list of projects of national significance.  The only question is "when", not "if".

Again I maintain that the cost of not building it, or of doing a half-arsed job and having to fix it later, will be dramatically higher than simply borrowing to build it.  The only reason Queensland's credit rating has degraded (by an infinitesimal amount) is because Queensland has actually been borrowing to fund projects for the good of the State.  No other state is game to make the investment Queensland has made in the last 10 years, in large part because they have not needed to deal with:
- massive population growth
- drought-proofing on large scale
- chronic under-investment in rail

To say the State can either have low debt or CRR is a false dichotomy.  You either borrow to fund a productive asset with a positive BCR, pay down the debt and end up with minimal or no debt in future and a good asset, or you just pay off debt for the sake of having no interest repayments and end up in the same position with no asset to show for it.

One cannot continue racking up debt after debt, Queenlands is approaching $85 billion by 2014/15.
That's why they sold off all the state assets, and still we are in debt trouble.
It's $100,000,000 per week in interest alone.
We could build the duplication from Beerburrum to Landsborough in just 3 weeks worth of interest.

I guess what I am saying is that debt catches up with you eventually, and that is where Queensland appears to be.

For the historic record, federally Liberals restore surpluses and Labor restores debt.

[Mr X]

Let me get this straight
"We don't believe this $8bn fantasy of Anna Bligh and Andrew Fraser is going to deliver value for money". (Newman, 2012)

It has a BCR of 1.4! How does he not understand that?

Or does he think he's smarter than thorough analysis done by economists etc. on this project?

"I have run a business for xyz years, been Lord Mayor for 7 years (sic) am more qualified than anyone the Labor party has put forward." (Newman, 2012)
Blowing your own trumpet much, Newman? Don't think this point needs much more commentary.

[shiftyphil]

One cannot continue racking up debt after debt, Queenlands is approaching $85 billion by 2014/15.
That's why they sold off all the state assets, and still we are in debt trouble.
It's $100,000,000 per week in interest alone.

Where did those figures come from, because they don't match the state budget figures.

[Jonas Jade]

[Mr X]

I wonder if Newman has any policies on those other "bottlenecks" which exist...?

1. NCL
2. Cultural Centre bus station

I guess in LNP land those issues can be wished away with roads, roads and MORE roads  

Now tell me, Campbell, how do you propose you fund your nation building upgrades to the Bruce Highway and Toowoomba Range?

[HappyTrainGuy]

What bottleneck? the only bottleneck is the stubby in my hand 

[#Metro]

- Newman says, not against the CRR, but not deemed affordable at this time. At what time in future? So heres plan B or C, in a few weeks....

But IA is paying for it! This doesn't make sense!

[SurfRail]

One cannot continue racking up debt after debt, Queenlands is approaching $85 billion by 2014/15.
That's why they sold off all the state assets, and still we are in debt trouble.
It's $100,000,000 per week in interest alone.

Where did those figures come from, because they don't match the state budget figures.

$100m/wk is $5.2Bpa, which is roughly 10% of the debt after sales of assets or rouighly where half of our state taxes per capita go to. Some loans may have defered payments?

So basically right now in 2011/12 the Qld govt is paying enough interest (assume 10% of total) on those loans that if collected annualy and redirected, would pay for the CRR, NCL duplication and SCL as well as complete the GC ling over the 3-4 year start to finish project time lines. And some people are not satisifed with this level of interest and actually want more and prepared to pay higher interest to boot! When is enough a enough, Greek economics anyone!

Even if Qld dropped from AAA to AA+, quote "infinitesimal amount" and it was worth say 0.1% interest rates = $54mpa or about 6-7 6 car sets for Brisbane, each year!

Agree some of the current $54B debt was required and simply playing catch up on hsitoric defered investment, plus keeping up with mineral boom plus dealing with mother nature. But it has to stop somewhere.

From Wiki
"Queensland is predicted to be in deficit until the 2015-16 budget.[21] The deficit has been partly caused by decreases in the prices for both coking coal and thermal coal.[37] Declining GST revenue is another cause that is partly attributed to the deficit.[37] Strong population growth and the demands this has placed on infrastructure spending as well as reductions in mining royalties have also strained recent state budgets, resulting in the loss of the state's AAA credit rating. Poor planning including the canceled Traveston Crossing Dam and cost blowouts in the budgets for the Gold Coast desalination plant, Wyaralong Dam, Tugun Bypass and Airport Link projects has not helped the bottom line.[38]

In 2009, Queensland Premier Anna Bligh announced plans for the privatisation of a number of government owned assets including Queensland Motorways, Queensland Rail's coal rail business QRNational, the Port of Brisbane, the Abbot Point coal terminal and Queensland Forestry Plantations.[39][40] The asset sale is expected to raise A$15 billion. There has been widespread public criticism of the sell-off which has led to slump in the Premier's popularity.[41] Unions and economists criticised the plans as unjustified and poorly timed.

Historically Queensland has been viewed as the lowest-taxing state. Queensland has slid to third place behind Victoria and Western Australia in a comparison of taxation competitiveness between other states and territories.[46] A measure of tax per capita from 2002 to 2007 has seen the figure rise 70%, from $1,321 up to $2,226, per person.[47] Payroll tax, which is payable when an employer's total annual wage payout is greater than A$1 million and has been described as "crippling" by some businesses, accounted for 26% of Queensland government tax revenue in the 2007-08 fiscal year.["

Look at the federal budget over last 20 years to see what the benefit of running longterm surplus and deficits gets you. 2007-2008 $27B surplus + money in the bank for the GFC. And there was probably more money spent on the interstate network in 2000-2009 than in 20 years before.

regards
Shane

I'd love to see your assessment of what rail infrastructure would have been built in the last 10 years without major borrowings.

Interest repayments are the price of acquiring an asset you cannot buy outright in cash.  What is so fatal about that?  Railways are expensive stuff, and they deliver commensurate social and economic benefits when done properly.

Frankly, talking about what we might have been able to afford is irrelevant, because we would not have had the money to do anything without raising the funds somehow.  No Richlands line, no Kuraby amplification, no 64 new trains actually delivered, no network enhancements generally.  These are all productive assets, and it is an extremely ham-fisted analysis to simply look at bottom lines when most of the gains are social or derived outside of government revenue.

You either build the infrastructure to catalyse/stimulate the economy and deliver productivity gains (which stagnated and then went backwards for years under Howard federally and Carr and his successors in NSW), or you do nothing until some magical far-off future where you can afford everything outright.  The only in-between is how much you want to skimp, because the need does not vanish.

Anybody talking about doing CRR on the cheap has really learned nothing from the last 20 years of railway infrastructure development in this state.

[Fares_Fair]

Let me get this straight
"We don't believe this $8bn fantasy of Anna Bligh and Andrew Fraser is going to deliver value for money". (Newman, 2012)

It has a BCR of 1.4! How does he not understand that?

Or does he think he's smarter than thorough analysis done by economists etc. on this project?

"I have run a business for xyz years, been Lord Mayor for 7 years (sic) am more qualified than anyone the Labor party has put forward." (Newman, 2012)
Blowing your own trumpet much, Newman? Don't think this point needs much more commentary.

The North Coast Line (NCL) had a BCR of 1.43 in 2006.
For a $300m outlay you got $430m over 20 years.

Regards,
Fares_Fair.

[SurfRail]

Again, it's a false dichotomy to say we can have CRR or NCL upgrades.  The funding for the NCL upgrade can probably come from austerity measures alone.

[shiftyphil]

$100m/wk is $5.2Bpa, which is roughly 10% of the debt after sales of assets or rouighly where half of our state taxes per capita go to. Some loans may have defered payments?

10%? What planet are we on that the state Government would be paying 10% interest on its debt?

[Fares_Fair]

Again, it's a false dichotomy to say we can have CRR or NCL upgrades.  The funding for the NCL upgrade can probably come from austerity measures alone.

It's not a false dichotomy, I wasn't saying we could have just one or the other.
We need both, a solution to the single line track along the north coast line and the single bridge at Merivale Street, amongst other things.

I see a need on the Sunshine Coast, a bottleneck that is pre-existing and needs fixing now and has impacts upon the north of the state (it also needs fixing further north of Nambour) and the need for CRR, a bottleneck for which a fix is needed by 2016.
If I am the only one on the forum to hold this view, for the reasons listed, I can live with that.


Regards,
Fares_Fair.

[#Metro]

I'd love to see your assessment of what rail infrastructure would have been built in the last 10 years without major borrowings.

Interest repayments are the price of acquiring an asset you cannot buy outright in cash.  What is so fatal about that?  Railways are expensive stuff, and they deliver commensurate social and economic benefits when done properly.

I agree with SurfRail. If it was commercially profitable, then private enterprise would have built it already, duh.
As for borrowings, I think capital works is OK, operations probably not so. There is a net gain in welfare (i.e. everyone is better off)
after the construction project is completed.

The purpose of CRR is to fix a problem with capacity and unblock the network.
Anything else is merely passing time and putting it off until another day. Geez, I wonder if they would take this scrooge approach with the roads - Imagine if transapex was cancelled and replaced with T2 lanes everywhere. Huh, I think the motorists et al would fall over in shock... and yet this is what the extra platforms and signal upgrade idea is equal to on rail.

[Jonno]

T2

I'd love to see your assessment of what rail infrastructure would have been built in the last 10 years without major borrowings.

Interest repayments are the price of acquiring an asset you cannot buy outright in cash.  What is so fatal about that?  Railways are expensive stuff, and they deliver commensurate social and economic benefits when done properly.

I agree with SurfRail. If it was commercially profitable, then private enterprise would have built it already, duh.
As for borrowings, I think capital works is OK, operations probably not so. There is a net gain in welfare (i.e. everyone is better off)
after the construction project is completed.

The purpose of CRR is to fix a problem with capacity and unblock the network.
Anything else is merely passing time and putting it off until another day. Geez, I wonder if they would take this scrooge approach with the roads - Imagine if transapex was cancelled and replaced with T2 lanes everywhere. Huh, I think the motorists et al would fall over in shock... and yet this is what the extra platforms and signal upgrade idea is equal to on rail.

T2 lanes would have helped our traffic problems whereas TransApex has just made them worse.  The analogy does not work!

[#Metro]

http://www.rba.gov.au/fin-services/bond-facility/prices/index.html

Judging from the RBA, the rate should be around 6% with maybe a bit of a buffer for risk.

The QLD Government rates are here, can't see them without registering but I expect they would be around 6% or so as well.

www.google.com.au/search?q=Queensland+Government+Bonds

[somebody]

6% of $85bn = $5.1bn.

Close enough to $100m/week for me.

[Fares_Fair]

Current figure is $570,000 per hour in interest repayments when $85 billion mark is reached.
That equates to $95,760,000 per week, near enough to the $100,000,000 oft quoted.

[somebody]

Does that Tas government budget position include unfunded liabilities for public servant superannuation?  That is quite a bit in Tas, and the "operating" keyword tells me it probably doesn't.

[SurfRail]

Shane - I tend to agree with most of what you have said, but unfortunately Queensland does not have the ability to simply defer these sorts of projects until we can pay them up front.  Growth in Queensland is phenomenal and needs to be accommodated with decent infrastructure, otherwise productivity will slow and the "slow" track of the 2-speed economy will start to deteriorate even further.  The OECD has already indicated our infrastructure backlog is of concern to them, we don't need to be reinforcing that message to everybody else in the world by just going back to the Howard method of doing absolutely nothing.

It really is no different to taking out a mortgage - and when you consider the lending rates and amounts involved, it's like somebody taking out a mortgage for $85,000 when their annual income is $43,000.00.  It really is not that big an imposition on the State's finances as people are making it out to be.  It would be fantastic to be debt free, but I would rather that the government borrow to keep important projects in the pipeline as necessary - the interest is just a necessary cost.

The financial crisis also had a major impact on revenue, but the government could not just simply pull the pin on the infrastructure program that was already basically underway by 2005-2006.  That would have sent unemployment skyrocketing and been worse for everybody.

I agree the debt needs to be sustainable, but frankly - it is.  We just need to be cautious about it getting much worse, and even with some contribution to CRR (and other BCR positive projects) it should still be possible to rein it in.

http://www.budget.qld.gov.au/budget-papers/2011-12/budget-highlights-17-2011-12.pdf

[Fares_Fair]

Shane - I tend to agree with most of what you have said, but unfortunately Queensland does not have the ability to simply defer these sorts of projects until we can pay them up front.  Growth in Queensland is phenomenal and needs to be accommodated with decent infrastructure, otherwise productivity will slow and the "slow" track of the 2-speed economy will start to deteriorate even further.  The OECD has already indicated our infrastructure backlog is of concern to them, we don't need to be reinforcing that message to everybody else in the world by just going back to the Howard method of doing absolutely nothing.

It really is no different to taking out a mortgage - and when you consider the lending rates and amounts involved, it's like somebody taking out a mortgage for $85,000 when their annual income is $43,000.00.  It really is not that big an imposition on the State's finances as people are making it out to be.  It would be fantastic to be debt free, but I would rather that the government borrow to keep important projects in the pipeline as necessary - the interest is just a necessary cost.

The financial crisis also had a major impact on revenue, but the government could not just simply pull the pin on the infrastructure program that was already basically underway by 2005-2006.  That would have sent unemployment skyrocketing and been worse for everybody.

I agree the debt needs to be sustainable, but frankly - it is.  We just need to be cautious about it getting much worse, and even with some contribution to CRR (and other BCR positive projects) it should still be possible to rein it in.

http://www.budget.qld.gov.au/budget-papers/2011-12/budget-highlights-17-2011-12.pdf

I agree with what rtt has said also.
I save up and buy, if I cannot afford it, I do not buy it until I can.

I accept however that debt does need to used and controlled carefully where the need is required.

Running an economy as a surplus is the best way to run any government.

I disagree with the Qld government debt position situation.
It's indefensible.

That is proven by a Labor Government selling off state assets, something considered unthinkable a generation ago.
That is proven by the downgrade in the states AAA rating to AA+. (Just imagine what the rating would be if the state assets weren't sold to reduce it)
Their reason was to pay down debt by their own admission.

It isn't insignificant when you consider that the interest alone could pay for major infrastructure upgrades, like the NCL duplication to Landsborough within 3 weeks.
Or Landsborough to Nambour $1.8B duplication in 18 weeks.

[#Metro]

I don't mind the state borrowing money, like others have said there needs to be a limit, and I'd prefer that borrowing funded projects (one off things) but NOT operations (i.e. keeping the lights on).

As for selling "state" assets - I couldn't care less what they do with a bunch of trees, a smelly port or coal trains.
In fact I think splitting QR into two will have benefits as the organisational focus is SOLELY on passengers now.

[SurfRail]

That is proven by a Labor Government selling off state assets, something considered unthinkable a generation ago.
That is proven by the downgrade in the states AAA rating to AA+.
Their reason was to pay down debt by their own admission.

In practical terms, a credit rating downgrade doesn't mean anything.  All it means is that Moody's recognises we already have significant borrowings.  What do you do with a AAA credit rating?  Borrow.  Do we need to borrow a huge amount of additional funds?  No - we are on target to be back in the black shortly and the massive amount of borrowing was caused by various pressures which are not as serious anymore (water grid in place, GFC in the past, infrastructure spending forecast to decline now the big splurge commenced in 2005 is largely over).  Once we pay the debt down, the rating goes back up.  No story here.

We needed a HUGE amount of infrastructure in one hit because of decades of neglect, and we needed to keep things ticking during the GFC to stop a downward spiral which would have been caused by the government clamming up.

QRN and other utilities are also performing significantly better now they are out of government hands, which is reflected in the successful IPO and current share price around 156% of the float value (168% for the Queensland bonus shareholders).  That is better for the State's economy than bloated, closed-shop organisations staying in public hands and sheltering public servants from doing actual work.

Interest repayments in my mind are just the price we have to pay for having gone through a very rough patch relatively unscathed.  The alternative could have been much worse - we lose money either way, this way we probably lost less.

[Fares_Fair]

That is proven by a Labor Government selling off state assets, something considered unthinkable a generation ago.
That is proven by the downgrade in the states AAA rating to AA+.
Their reason was to pay down debt by their own admission.

In practical terms, a credit rating downgrade doesn't mean anything.  All it means is that Moody's recognises we already have significant borrowings.  What do you do with a AAA credit rating?  Borrow.  Do we need to borrow a huge amount of additional funds?  No - we are on target to be back in the black shortly and the massive amount of borrowing was caused by various pressures which are not as serious anymore (water grid in place, GFC in the past, infrastructure spending forecast to decline now the big splurge commenced in 2005 is largely over).  Once we pay the debt down, the rating goes back up.  No story here.

We needed a HUGE amount of infrastructure in one hit because of decades of neglect, and we needed to keep things ticking during the GFC to stop a downward spiral which would have been caused by the government clamming up.

QRN and other utilities are also performing significantly better now they are out of government hands, which is reflected in the successful IPO and current share price around 156% of the float value (168% for the Queensland bonus shareholders).  That is better for the State's economy than bloated, closed-shop organisations staying in public hands and sheltering public servants from doing actual work.

Interest repayments in my mind are just the price we have to pay for having gone through a very rough patch relatively unscathed.  The alternative could have been much worse - we lose money either way, this way we probably lost less.

Reported back in black of a mere $60 million for 2014/15 by Andrew Fraser just last week. That's barely in the black really, then back into red afterwards.

[SurfRail]

Reported back in black of a mere $60 million for 2014/15 by Andrew Fraser just last week. That's barely in the black really, then back into red afterwards.

To be sure.  The budget still definitely needs some very careful stewardship - I'm not trying to give the impression that I am cavalier with how the State should conduct its finances.

I still think we are better off than the alternative, which would effectively have been letting the State's economy slip (further?) into recession.

[Golliwog]

There was an article in this mornings Courier Mail. Haven't yet found it online yet, but it stated the revised cost of CRR was now $6.4B

It also talked about how much funding they were seeking from the Fed's. IIRC it was something like $3.9B from the Fed's, and $1.3B from the State. It wasn't clear where the remainder was coming from, but I didn't read to carefully as I had to make a train. Either way, good news on the lower cost.

[SurfRail]

There was an article in this mornings Courier Mail. Haven't yet found it online yet, but it stated the revised cost of CRR was now $6.4B

It also talked about how much funding they were seeking from the Fed's. IIRC it was something like $3.9B from the Fed's, and $1.3B from the State. It wasn't clear where the remainder was coming from, but I didn't read to carefully as I had to make a train. Either way, good news on the lower cost.

That's only $1.2bn of private equity to raise - not a huge issue.  GCRT had a substantial component of it too so it can clearly work.

I had always suspected the cost would be inflated to a worst case scenario to accommodate potential issues, which the detailed design process has then winnowed down to a more accurate figure.  Given the amount of tunnelling involved this sounds like pretty good value - around $355m per kilometre if it does not include Trouts Road, quite a bit less if it does.

[Stillwater]

The fact that the revised price and funding split has been revealed today (Friday) suggests that the feds and the Bligh Government have struck a deal on CRR, just in time to become a major plank of the ALP election campaign launch on Sunday, when the PM will be in town.  A joint media conference involving the Premier and PM would flesh out the details.  Campbell Newman should have his lines rehersed for when the media comes knocking on his door and asks whether he will commit to spending $1.3 billion of state money on CRR in the event of a LNP government being elected on 24 March.  If he says no, he is kissing goodbye to $3.9 billion from the feds and what Queenslanders will have left is platform enhancement at South Brisbane and Southbank and some signalling.

By the same token, now that the $1.3 billion figure is out there, Campbell Newman has the opportunity to say that is the amount of money available for a cheaper Brisbane metro.  His other option is to say that, in government, he would renegotiate a $5.2 billion (governments contributions only) deal with the feds to spend on a broad range of things - metro, duplication on the Gold Coast Line, duplication Sandgate-Shorncliffe, extra track between Beerburrum and Landsborough etc to show that the LNP can offer 'more value for money'.

The feds could play hardball by saying that its $3.9 billion is for CRR, or nothing -- the now or never option.

[O_128]

By the same token, now that the $1.3 billion figure is out there, Campbell Newman has the opportunity to say that is the amount of money available for a cheaper Brisbane metro.  His other option is to say that, in government, he would renegotiate a $5.2 billion (governments contributions only) deal with the feds to spend on a broad range of things - metro, duplication on the Gold Coast Line, duplication Sandgate-Shorncliffe, extra track between Beerburrum and Landsborough etc to show that the LNP can offer 'more value for money'.

The feds could play hardball by saying that its $3.9 billion is for CRR, or nothing -- the now or never option.

More like he'll want the money for roads. I expect Newman to come out saying that the fact that the feds are putting so much money in means he will support while looking for ways to cut costs so the state contributes less.

If he doesn't he is a very,very stupid man.

[ozbob]

A metro will cost just as much if not more than CRR IMHO when all properly costed, and you still have capacity issues on the wider rail network.  True metro will come eventually but not for 20 years plus I reckon.

I had a quick check of the CM before heading out this morning and must have missed it, if someone can post the details here it would be worthwhile.

I have suspected that the LNP pitch would be the platforms, signalling spin, and an 'aspiration' metro.  Designed to be a slick vote grabber rather than actual sound transport building solutions.

Victoria beat Queensland in the game of IA poker, the LNP don't seem like card sharps either ..

[Stillwater]

Don't disagree on the metro costs, Ozbob.  And you are also correct about Victoria being the better poker players in obtaining federal IA money.  The election circus means politicians have to distinguish their policies.  LNP has signalled that it won't build CRR, but has different ideas.  It can't bring itself to say 'we will build what Labor said', even though that may be the sensible thing to do.

If it wanted an out, the LNP could claim a statesmanlike pyrrhic victory and say that its hardline on CRR has 'driven the price down', thereby saving the taxpayers $2 billion on the original cost estimate.  Under those circumstances, it could endorse CRR and say that it would work harder in government to get the private sector to cough up more than $1.2 billion, further reducing the burden on taxpayers.  That would meet the Cambell Newman line that the LNP will do things better and cheaper.

[#Metro]

If it wanted an out, the LNP could claim a statesmanlike pyrrhic victory and say that its hardline on CRR has 'driven the price down', thereby saving the taxpayers $2 billion on the original cost estimate.

I think the bottom already fell out of the LNP's boat because they already DID reduce the price of CRR by making station cavities smaller and all that.

Whoops...

[#Metro]

The fact that the revised price and funding split has been revealed today (Friday) suggests that the feds and the Bligh Government have struck a deal on CRR, just in time to become a major plank of the ALP election campaign launch on Sunday, when the PM will be in town.  A joint media conference involving the Premier and PM would flesh out the details.  Campbell Newman should have his lines rehersed for when the media comes knocking on his door and asks whether he will commit to spending $1.3 billion of state money on CRR in the event of a LNP government being elected on 24 March.  If he says no, he is kissing goodbye to $3.9 billion from the feds and what Queenslanders will have left is platform enhancement at South Brisbane and Southbank and some signalling.

By the same token, now that the $1.3 billion figure is out there, Campbell Newman has the opportunity to say that is the amount of money available for a cheaper Brisbane metro.  His other option is to say that, in government, he would renegotiate a $5.2 billion (governments contributions only) deal with the feds to spend on a broad range of things - metro, duplication on the Gold Coast Line, duplication Sandgate-Shorncliffe, extra track between Beerburrum and Landsborough etc to show that the LNP can offer 'more value for money'.

The feds could play hardball by saying that its $3.9 billion is for CRR, or nothing -- the now or never option.

The whole idea of CRR is the allow everything else to work properly.
Any alternative project must generate $9 billion dollars of benefits (note benefits, not costs) to even be on the same scale of benefits as Cross River Rail.
Don't fall into the trap of cost-only analysis. True cost-benefit analysis looks at BOTH costs AND benefits.

[Stillwater]

TT, the worth of a project and the benefit-cost justifying its construction are self-contained within each project.  The comparison concerning the relative worth of one project against another is encapsulated in the BCR, not the dollar costs.

For instance, it is possible to have a $100 million project with a BCR of 4 and a much larger project, in the billions, with a BCR of 2.  The $100 million project generates more benefits per $1 outlay than the more costly project.  It is justified to proceed in its own right, the fact that there may be a $100 million reduction in the available funding pool not withstanding.

The process for assessing the benefits and costs of major infrastructure projects is laid down in guildelines published by Infrastructure Australia.  Using different benefit and cost assessment porcedures for different projects defeats the purpose, which is to compare like with like.

[#Metro]

TT, the worth of a project and the benefit-cost justifying its construction are self-contained within each project.  The comparison concerning the relative worth of one project against another is encapsulated in the BCR, not the dollar costs.

For instance, it is possible to have a $100 million project with a BCR of 4 and a much larger project, in the billions, with a BCR of 2.  The $100 million project generates more benefits per $1 outlay than the more costly project.  It is justified to proceed in its own right, the fact that there may be a $100 million reduction in the available funding pool not withstanding.

The process for assessing the benefits and costs of major infrastructure projects is laid down in guildelines published by Infrastructure Australia.  Using different benefit and cost assessment porcedures for different projects defeats the purpose, which is to compare like with like.

Yes I agree, but the NPV must also be used as it is possible to have identical BCRs for two projects but have very different NPVs.

I refer to decision rules from the Department of Finance and Deregulation:
http://www.finance.gov.au/obpr/docs/Decision-Rules.pdf

Which decision criterion: NPV or BCR?
NPV gives an estimate of the absolute size of the net social benefit (and hence the potential Pareto improvement) of a proposal and is the theoretically correct measure to use. If, in practice, the NPV and BCR were equally easy to compute, and were consistent in terms of recommending one option over another, then it would not matter which criterion were used. However, because BCR summarises the relative size of the costs and benefits of a proposal, not the absolute size, this is not the case.

The relative size of a proposal's costs and benefits, and hence the BCR, depend on how the impacts are treated — are they added to costs or subtracted from benefits? For example, a proposed new road would divert traffic from existing roads, and thereby reduce accidents on these roads. But there would be accidents on the new road. The accidents on the new road could be counted as costs of the proposal, or they could be subtracted from the benefits of the proposal. Their classification would make no difference to the estimate of NPV, but would make a difference to the estimated BCR3.
Additionally, the NPV and BCR can give conflicting results when used to rank alternative projects. This is illustrated in table 1: under the NPV criterion, project B is preferred to A, while under the BCR criterion project A is preferred. However, because project B represents the option with the largest net social gain, it should be chosen.

BCR is only preferred to NPV in situations where capital projects need to be funded from a limited pool of funds.

SO assuming that we can actually get IA to fund the project, NPV should be used IMHO.

[Stillwater]

IA has established the assessment guidelines for major new infrastructure projects.  They are available on the IA website, and include assessment methodologies for social, environmental and urban renewal qualities of any proposed project, in addition to transport benefits in the case of a transport project.  They are the guidelines.

To argue a different way of calculating CRR, different to the way all other major projects submitted to IA are assessed, would appear illogical.  In any event, a different assessment is not required, as the CRR project, as finally submitted, had a BCR of 1.4.  The cost has come down from just over $8 billion to $6.3 billion, and the private sector is likely to pick up $1.2 billion.  Originally, an $8 billion project had a BCR of 1.4.  It has now become a $5.2 billion cost to government which, when compared with the original return on capital means that the taxpayer gets about $11 billion in benefits for a $5.2 million outlay.  That's a BCR above 2.

In respect of net present value, there are dangers in calculating benefits and costs based on today's dollars for projects that might be built five or six years down the track.  To be prudent, the project cost must be calculated to allow for inflation and to make the cost the one that applies when the project finally gets built.  Otherwise the cost side of the BCR goes up and the true value of the benefits go down.  If a project cost is calculated at being $100 million today, but it will cost $110 million when it is finally built in six or seven years time, the budget calculations should be made on the higher cost estimate.  Otherwise, when you finally get around to building the project, you are $10 million short of the necessary money.

[ozbob]

From the Brisbanetimes click here!

Cross River Rail moves a step closer

Cross River Rail moves a step closer
March 9, 2012 - 11:03AM

Brisbane's Cross River Rail project is one step closer to starting with confirmation this morning that the state has formally asked the Federal Government for $3.98 billion in funding.

With the funding request spaced out over seven years, on average that means the state government is asking annually for comparable sums of money that the Commonwealth has already promised to Brisbane City Council's Legacy Way tunnel ($500 million) and for the Petrie to Kippa Ring rail line ($740 million).

The underground rail project's estimated construction cost has been scaled back from an estimated $7.7 billion in 2011 to $6.4 billion this week after a detailed study by Australia's chief infrastructure assessment group, Infrastructure Australia.

It also indicates for the first time the scale of funding sought from the state government and private sector for the project: the remaining $2.42 billion over seven years.

Last month Infrastructure Australia elevated the project higher on their Australian-wide priority list, classing it as "ready to proceed", meaning all impact studies had been completed satisfactorily.

This morning, Transport Minister Annastacia Palaszczuk confirmed in a statement the Queensland Government had asked for the staged funding of $3.98 billion over seven years.

"Projects dubbed 'ready to proceed' by Infrastructure Australia are recommended as the highest priorities for Federal Government infrastructure funding," Ms Palaszczuk said.

"They tick all the right boxes in helping to solve infrastructure needs, providing significant economic benefits and having a 'ready to go' status," she said.

Sources have indicated to brisbanetimes.com.au the funding – if approved – would be announced in this year's federal budget in May.

Last year brisbanetimes.com.au identified that one of Queensland's main rivals for infrastructure funding was a similar underground tunnel project for inner-city Melbourne.

The Cross River Rail would run 18 kilometres from Yeerongpilly to Victoria Park and includes new underground rail stations at Wolloongabba under the Sunmap Centre, Boggo Road and Albert Street and Roma Street in the CBD.

It includes new ground level stations at Yeerongpilly and Exhibition.

LNP leader Campbell Newman has initially supported the need for an underground rail project in Brisbane, then later changed his mind to supporting a less expensive "metro" rail link.

Private consultants last month recently flouted a cheaper option with an extension of the Riverside Expressway carrying a light rail link from Woolloongabba to Roma Street.

With the LNP still tipped to win the state election in May 24, Mr Newman's position  on the project will be crucial.

Brisbane now has only one rail crossing which allows trains from the southside of the city to get the  northside, the Merivale Rail Bridge near the Gallery of Modern Art at South Brisbane.

Read more: http://www.brisbanetimes.com.au/queensland/state-election-2012/cross-river-rail-moves-a-step-closer-20120309-1uoi9.html