Finance minister Mathias Cormann says an off-budget $8.4 billion Inland Rail investment is justified, despite the Australian Rail Track Corporation saying the project will not directly pay for itself.
Cormann said on Tuesday the project would essentially pay for itself, because in addition to a direct uplift in ARTC revenue, Inland Rail will substantially lift the value of the ARTC, which a future government will be able to sell.
Inland Rail will connect Brisbane and Melbourne with a continuous, high-capacity rail link.
Comprising a mixture of new track construction, and upgrades to existing track, Inland Rail is designed to better connect key agricultural and manufacturing centres in Queensland, New South Wales and Victoria with import and export markets.
The project will also improve freight movements on the country’s north-south, and east-west corridors, by cutting out the bottleneck of Sydney’s rail network.
“In terms of the expectation of whether or not there is a positive return, it is not only a matter of the cash flows, that is the revenues,” Cormann told a senate estimates hearing in Canberra yesterday. “It is also a matter of the impact of the expected future capital value, the expected future sales value.
“That is something the Labor Party would be well aware of because that is the basis on which you in government classified the investment in NBN as an equity injection. We expect the ARTC to continue to deliver a positive rate of return to the Commonwealth.”
The finance minister’s comments came a week after the ARTC’s chief executive, John Fullerton, confirmed to senate estimates that the project would not directly pay for itself.
“[From] a strict ARTC point of view, no, the revenues that flow to us wouldn’t cover the full capital cost and provide a return,” Fullerton said.
Cormann faces increased scrutiny over Inland Rail’s financial viability because the Government is funding it through “equity funding”, which means its cost will not add to the Budget’s debt levels, but comes with the assumption the money will be recouped.