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The Commonwealth government could provide more funding for Melbourne’s Suburban Rail Loop if it can help advance the government’s housing priorities.

However, federal Infrastructure Minister Catherine King made it clear that any additional funding for the mega project hinges on the actual cost – an amount that is still in dispute.

Federal Infrastructure Minister Catherine King at the AFR Infrastructure Summit in Sydney on Tuesday.Credit: Michael Quelch

“We want to build housing around our public transport hubs because that is really what it is about,” King said. “We are in the process of wanting to build a million homes.”

Speaking at the Australian Financial Review’s Infrastructure Summit on Tuesday, King said that a review of the nation’s $120 billion infrastructure pipeline – to be released in coming days – had found no new projects could be started until 2033 unless major changes were made.

Dozens of roads and rail projects are set to be delayed or cancelled under recommendations in the report, which found the value of construction work in the pipeline yet to begin has already blown out by $14.2 billion. The Victorian government has received a copy of the final document.

But King said future funding for the Allan government’s signature underground rail loop, which was quarantined from the review, was still being independently assessed.

While the Commonwealth has committed $2.2 billion, the project’s business and investment case assumes that the federal government will contribute up to a third of the $35 billion required to build the first stage.

“It is a costly project. It will be. And it will take a long, long time to build, but you’ve got to start somewhere, and that’s what we’ve said – we’ll invest in those early works,” King said. “We need to really understand the costs before we put any further investment in.

“[Victoria], of course, will ask us for more, but we’ve said to them clearly – we want to get a much better handle on the costs before we actually commit anything further to it.”

Suburban Rail Loop East, running from Cheltenham to Box Hill, has been costed at $35 billion, however projects underway across the country are reporting major budget blowouts as labour and material prices soar.

The total cost of the loop’s first two stages, which includes an extension of the railway from Box Hill to Tullamarine, is a source of contention.

Victoria’s Parliamentary Budget Office predicts the price tag for these stages will be $125 billion. However, Premier Jacinta Allan has rejected these figures and argued they do not account for inflation over the decades it will take to deliver.

The government’s business case assumed the cost of both stages would not be higher than $57.6 billion. This figure has also been disputed because it leaves just $22.6 billion for a second stage that is longer and more complex.

King said that because rail projects were expensive they struggled in terms of cost benefit analysis, adding though that the Suburban Rail Loop was an important project in the context of housing.

The minister also released a new infrastructure policy statement to refocus the federal government’s spending priorities and allow for further spending on proposals to increase the supply of homes.

Under these guidelines, projects can be considered nationally significant and worthy of federal funding if they are worth at least $250 million, are connected to key freight routes or align with larger national priorities such as critical minerals or housing.

King said the federal government would consider Infrastructure Australia’s advice if the independent body said the rail loop didn’t stack up, but that funding decisions were ultimately made by cabinet’s expenditure review committee.

They will also move to funding projects with the states and territories on a 50/50 basis, rather than 80/20 or fully funding them. This approach is more common for road projects in regional Australia.

Allan said she was less worried about a change to the funding split than actually getting cash out of the federal government.

But she said she would welcome the chance to have the Commonwealth contribute a greater share to projects such as the Suburban Rail Loop and the North East Link – a $16.5 billion toll road from Bulleen to Greensborough.

“For too long, on too many projects here in Victoria under the former federal Liberal-Nationals government, there was no funding split because it was zero,” she said.

State Transport Infrastructure Minister Danny Pearson said a 50/50 split posed a problem for regional and rural projects.

“It would be concerning if the federal member for Ballarat, Minister King, sought to walk away from regional Victoria, that would be concerning and disappointing, something I hope that they will not do,” he said.

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