Inland rail: federal government won’t reassess business case despite cost blowout warnings

The federal government will not review its business case for the inland rail project, rejecting any reassessment as "not an appropriate use of taxpayer dollars", despite cost blowouts identified by a Senate inquiry into the major infrastructure project.

The Senate report, released in August 2021, called on the government to update the 2015 business case undertaken by the former Nationals leader John Anderson, which originally estimated the cost at $4.7bn.

The inland railway is now budgeted at $14.5bn, although the Senate inquiry heard expert opinion that costs could exceed $20bn.

A new business case was one of 26 recommendations from the Senate report. But the government supported only 10 recommendations in its response, released quietly in the week before Christmas.

However, the government response said it would not support the recommendation to update the 2015 business case, as it "does not accept that further review of the route or business case for Inland Rail is needed or would be an appropriate use of taxpayer dollars".

The government response said its project was driven by increasing freight needs over the next three decades.

"By 2050, it is estimated that almost 70% of the freight to be carried on Inland Rail will be for domestic use," it said.

"This includes household goods and groceries produced in Australia and consumed in our major cities, with over 50% of this freight forecast to be carried between Melbourne and Brisbane to meet demand in southeast Queensland from its rapidly growing population."

The final Senate report highlighted the potential for a cost blowout closer to $20bn following predictions from John Abbott from the Central Queensland Regional Organisation of Councils and the private sector initiative National Trunk Rail.

A National Trunk Rail spokesman told the committee in January last year that the estimate of $20bn "might be on the low side," warning that it was likely additional funding announcements would be made because "[t]here is a huge amount still unaccounted for - a huge amount."

The report also found "one of the key critiques directed at the Inland Rail has been whether the project remains viable if demand for coal declines or whether restrictions are imposed on the movement of coal along the Inland Rail alignment".

The NSW Farmers Association and Country Women's Association were successful in getting the government to support a recommendation that the Australian Rail Track Corporation (ARTC) engage an independent mediator to facilitate an improved working relationship with the two groups.

However, the government did not support the recommendation from NSW Farmers and the CWA that the federal and state governments establish an independent international flood and hydrologist panel to conduct a review of the flood modelling and design features of the inland rail project in NSW.

The federal government is instead relying on the NSW government's environmental approval process for inland rail which includes an independent review by a hydrologist of the ARTC's flood modelling as a mandatory requirement of an environmental impact statement.

However, as Peter Holt, the lawyer engaged by the NSW Farmers Association and CWA, told Guardian Australia in its major investigation into the infrastructure project, the environmental impact statement currently being exhibited "operated at a very high level of generality" and landholders' serious concerns about flooding remain unresolved.

The government also rejected a recommendation to establish an independent comparative review of the current Narromine to Narrabri alignment with the proposed Dubbo-Coonamble line and alternative routes around Narrabri, taking into account both the impacts and potential broader economic benefits for regional economies and communities.

The government cited "even a small increase in distance and transit time translates into an increase in operational costs for Inland Rail users".

Danica Leys, the CEO of the CWA of NSW, said she was hopeful that the deputy prime minister and infrastructure minister, Barnaby Joyce, would demonstrate that he was willing to fix the issues clearly outlined.

"That didn't happen. Yet again, communities were ignored in favour of future ribbon-cutting opportunities for politicians," Leys said.

A spokesperson for the deputy prime minister told Guardian Australia the government had agreed to the majority of the review's recommendations, which responded to a range of stakeholder concerns.

The government supported 10 recommendations, supported four in principle, noted five and rejected six, including the most substantive first three recommendations regarding the costs and the business case.

The spokesperson said there were "compelling reasons" for not supporting certain recommendations.

"There are always competing demands when it comes to the development of national infrastructure projects and these are considered in the context of the significant benefits they deliver," the spokesperson said.

"Inland rail will create thousands of jobs in regional Australia and generate new economic opportunities for our exporting businesses, helping them grow and drive our economy forward."

Adrian Lyons, the chair of the NSW Farmers inland rail taskforce, said they supported the project, but desperately needed a recalibration of how it was implemented.

"The Senate inquiry report provided a great template for that to happen. The federal government, however, have really missed the opportunity to rectify wrongs and get this project back on an even keel," Lyons said.

"It was disappointing for us, and for the communities and individuals impacted, to see such a dismissive response to the Senate report."

The government also rejected a recommendation for an ongoing inquiry for oversight of the inland rail project on the grounds that the ARTC, as a commonwealth company, was already subject to a range of oversight mechanisms, including regularly appearing before the Senate Rural and Regional Affairs and Transport Legislation Committee.

Senator Glenn Sterle, the chair of the inquiry, described the government's response as "very poor" and called on the Coalition to support all the Senate inquiry's recommendations.

"They're not Glenn Sterle's recommendations. It was evidence taken from witnesses throughout the couple of years we did the inquiry. Listening to all sides of the argument, listening to experts, listening to local people, listening to people that were expected to use the inland rail project that had had no say," Sterle said.

"I'm so thankful we were able to have the inquiry because then we found out just how bad things really were."