Senator Rice on National Rail Program


Senator RICE:  Thank you, Mr Mrdak, for being willing to take my questions now. I want to go through some of the other programs outlined in the budget papers. The  National   Rail  Program is outlined on page 133. The government has announced that this is a $10 billion program?

Mr Mrdak : Yes, that is correct.

Senator RICE:  Yet the forwards show that there is expenditure of $600 million from 2019-20.

Mr Mrdak : That is what is within the forward estimates, and the balance is available from 2021-22.

Senator RICE:  But that, in terms of being beyond the forward estimates, does not have any status or standing?

Mr Mrdak : It is a commitment by the government to a $10 billion program. Earlier in the day we took senators through the breakdown of the government's $75 billion program, which includes the allocation to that  rail  program.

Senator RICE:  Yes. But, as it stands, over the forwards it is only a $600 million program rather than a $10 billion program.

Mr Mrdak : That is correct.

Senator RICE:  Why is it not starting until 2019-20, given that there are a number of projects, such as Melbourne Metro, that Infrastructure Australia have assessed and that have been given the tick of being good projects that could have investment put into them right now?

Mr Mrdak : If I could start with that one: as we have discussed previously, the Victorian government has now announced it will be proceeding to fund Melbourne Metro itself, so we are working on the basis that that project will be funded by the state of Victoria.

In relation to the other projects, late last year the government announced a series of urban  rail  planning processes around five major cities. That work is yet to take place with jurisdictions. That will be an important input to the work on projects being developed. At the same time, there are a number of projects which the Commonwealth is considering—and I think you had a conversation with Mr Davies this morning in relation to IA's view of the readiness of Cross River  Rail  and the like. The government has taken the decision that it would be prudent to fund this from the latter years of the forward estimates and then over the following six-year period.

Senator RICE:  But, even then, in the latter years you are only talking about $600 million out of this $10 billion project.

Mr Mrdak : That will be somewhat dependent on what comes forward from the jurisdictions as to the timing of that investment. If project proposals came forward earlier and the government was able to find room in the budget, then it may consider bringing forward the money, but at this stage it is profiled that way.

Senator RICE:  So it is really a $600 million project rather than a $10 billion project at this stage.

Mr Mrdak : No, it is a $10 billion program commitment, and at this stage $600 million is in the forward estimates; the balance is a significant commitment beyond the forwards.

Senator RICE:  Moving on to the Infrastructure Investment Program offsets, page 134 shows a reduction of $1.6 billion in that program. Can you explain where that money is going?

Mr Mrdak : Yes. It is funding a range of measures that are in the budget. If I can take you through the offsets, there is funding for the commitment to the faster rail connecting capital cities business planning.

Senator RICE:  That is the $20 million?

Mr Mrdak : That is the $20 million. There is Australian Transport Safety Bureau additional resourcing.

Senator RICE:  What is the funding there?

Mr Mrdak : It is $11.9 million over five years—Infrastructure Australia additional funding for reform initiatives and its resourcing base.

Senator RICE:  That is the $11.9 million?

Mr Mrdak : For the delivery of Inland Rail, there is funding for the department to deliver the Inland rail component which falls to the department. I can give you this in detail, including—

Senator RICE:  Out of that $1.6 billion, we have got so far only pretty small amounts—not that I would decry $10 million, but it is pretty small change. You will have a lot of programs at that amount to add up to $1.6 billion.

Mr Mrdak : I am coming to the larger numbers.

Senator RICE:  The Inland Rail one was how much?

Mr Mrdak : I will get you that number. I have the figures out over the forwards and I will give you these broken down, perhaps on notice.

Senator RICE:  Yes.

Mr Mrdak : I will list them first and then we can come back to areas you are particularly interested in. There is funding for the Department of Finance to assist the Inland Rail PPP delivery. There are offsets for the department in meeting the cost of the equity contribution, the public debt interest costs for the—

Senator RICE:  Can you give me the amounts as well?

Mr Mrdak : Not readily because I do not have them totalled. I just have the titles at the moment. I can get that for you. On the Inland Rail , we have not published those numbers because they relate to the equity injection and profile of that, and also the public debt interest cost parameters of that have not been published.

Senator RICE:  What is the order of magnitude, then, of the—

Mr Mrdak : I would have to take that on notice and seek advice from ministers. The decision in the budget is not for publication.

Senator RICE:  Okay, so that is secret.

Mr Mrdak : There is some departmental funding for delivering the Western Sydney Airport.

Senator RICE:  Is the cost of equity also a secret?

Mr Mrdak : Yes, that is not for publication. In delivering the Western Sydney Airport, there is the department's cost in establishing the Western Sydney Airport company and oversight. There are some additional resourcing for the Department of Finance—

Senator RICE:  How much are they?

Mr Mrdak : It is $600,000 per year. These are set out in table 1.2 of our portfolio budget statement.

Ms Zielke : Pages 18 and 19.

Mr Mrdak : There is funding for the Department of Finance for their oversight of the Western Sydney Airport issues. There is the public debt interest costs, which have to be offset for the equity injection into the Western Sydney Airport. That is quite a substantial number which, again, the government has not published. And then we have offsets for the Building Better Regions Fund, $200 million, and the Regional Infrastructure Fund, $272 million, as well as some departmental costs in administrating those programs. Then, we have Round 3 of the Stronger Communities Programme, which is published at $27.7 million; the establishment of the Infrastructure and Project Financing Agency in the Prime Minister's department, which has funding of $4.2 million per annum; and some previous costs for the Australian Transport Safety Bureau, of the MH370 search costs, which are in 16-17 at $3 million.

Senator RICE:  How much was that?

Mr Mrdak : Three million dollars. The Sunshine Coast Airport concessional loan, the public debt interest cost, again, not for publication. There is $40 million for supplementary and local roads in South Australia. There is $16 million over the forward estimates for keys2drive, the road safety program. There is an allocation for the Far North Collector Road project in New South Wales of $13.8 million and the National Rail Program of $600 million. There is also a further offset for community development grants following the MYEFO process of $48.6. That totals 1.631. As I say, I am not in a position to give you the breakdown of the public interest debt or the equity injections. The government has not published those.

Senator RICE:  Basically, an awful lot of these other projects that are outlined in the budget are being funded out of that $1.6 billion?

Mr Mrdak : That is correct.

Senator RICE:  What is the total new spending on infrastructure in this budget?

Mr Mrdak : There are a range of new projects. There is the equity injection we have been discussing into Inland Rail. There is the equity injection into the Government Business Enterprise, which will build the Western Sydney Airport—up to $5.3 billion. There is a $10 billion National Rail Program—

Senator RICE:  But that is not in the forward estimates. Over the forwards?

Mr Mrdak : There is $600 million in the forwards.

Senator RICE:  But the $600 million came out of that $1.6 billion, you just told me.

Mr Mrdak : But it is new allocated funding to a new program—

Senator RICE:  But we have had this pot of $1.6 billion that has been reduced, so, basically, I want to know what, in addition to that $1.6 billion, in terms of new spending on infrastructure, is in this budget.

Mr Mrdak : There is the $550.2 million for rail projects in Victoria; a further $461 million for Victoria for further projects in the state; $30 million to develop a business case for the Melbourne airport link; and an additional $20.2 million for the Murray Basin rail upgrade. There is a committal of $843 million for additional projects on the Bruce Highway; $20 million, as we have discussed, to support business cases for faster rail services between major cities and regional centres; $13.8 million for the North Collector Road; and $472 million for the regional infrastructure package.

Senator RICE:  We have the big equity investments in Inland Rail and Western Sydney Airport. Is that right?

Mr Mrdak : Yes.

Senator RICE:  Putting those aside, what is the total then of those projects in terms of new additional spend?

Mr Mrdak : It includes the $10 billion for  national rail  —

Senator RICE:  No. I want to know over the forward estimates, and, as you just said, that $600 million came out of that $1.6 billion box.

Mr Mrdak : That is $600 million in the forward estimates—

Senator RICE:  But that came out of the $1.6 billion pocket?

Mr Mrdak : It came out of the final year of the forward estimates. The government has set up a 10-year rolling program, so this is new money allocated in 2021.

Senator RICE:  But if you have that $1.6 billion is over at the forward estimates as a reduction, that $600 million, as you just said, is being funded out of that $1.6 billion pot.

Mr Mrdak : There is a process that has gone on, which is that the government has funded the last year of the forward estimates with around $4.46 billion. It has then made some offsets and then put some money back into the program, including the national rail funding. That is how you end up with the 2021 allocation.

Senator RICE:  It still seems to me that you are double counting that $600 million. If you were saying that it was coming out of that offset, that $1.6 billion—

Mr Mrdak : I can assure you it is not, but that is how the final 2021 year has been structured.

Senator RICE:  It would be good to get an itemised list of the new infrastructure spend in addition to what has been reallocated from that $1.6 billion.

Mr Mrdak : I will take that on notice.

Senator RICE:  Moving on to the money that is being spent or not spent on Victorian infrastructure investments—where we have a table that has zeros in it and lots of dashes. Provision for the various projects that are listed underneath has already been included in the forward estimates, so there is no new funding that is being allocated to those Victorian infrastructure investments?

Mr Mrdak : It is new funding for infrastructure because previously it was held in the contingency reserve and not allocated to the infrastructure program. In the budget this is new funding for infrastructure, and that has been transferred from the contingency reserve, previously at MYEFO, into the Infrastructure Investment Program to provide the billion dollars for priority regional and urban infrastructure in Victoria.

Senator RICE:  So that is why it does not actually appear in your table there, because it is a transfer?

Mr Mrdak : Yes. It is new money for infrastructure that had previously been sitting in the asset recycling contingency reserve.

Senator RICE:  So, essentially, it is the asset recycling money.

Mr Mrdak : Previously that program had closed, so the government had not previously allocated that. What has occurred in this budget is that they have allocated that to infrastructure.

Senator RICE:  The Victorian government and the federal government have not yet come to agreements as to where this money is going to be spent in terms of the rail projects. That is the case—isn't it?

Mr Mrdak : That is correct—as we discussed this morning.

Senator RICE:  Can you take me through the consultation and the negotiation process so far? Why have you not been able to reach agreement with the Victorian government?

Mr Mrdak : It has only been a couple of weeks—less than two weeks—since the budget. We have been working on—


Senator RICE:  But there has been a history—as you and Victorians are very well aware.

Mr Mrdak : There is. The Victorian government provided some advice in relation to some regional  rail projects that it had developed as part of its regional rail program. The Australian government has proposed an allocation of the initial $500 million for those lines.

Senator RICE:  But that is not what the Victorian government wanted; was it?

Mr Mrdak : It remains a matter of a difference of opinion, I think, in relation to it. The Victorian government, as you know, in their budget two weeks ago announced $1.4 billion for regional rail, but that was all Commonwealth funding to which the Commonwealth had not agreed.

Senator RICE:  It seems that this has been happening quite a bit. Rather than a negotiation leading to a shared announcement, first of all we have Victoria making an announcement, and then you announce a different amount of money in the budget.

Mr Mrdak : That is right, and we have to reach a position on that. Minister Chester has been very clear in his public commentary about seeking to reach an agreement with the Victorian government in relation to the expenditure of the $500 million as well as the additional funds—an additional $461 million. Minister Chester has written to Victoria. He has had a series of meetings with Victorian ministers, including on last Friday, and we are now looking to work through the Victorian proposals and projects to see whether we can reach agreement.

Senator RICE:  After the budget. After various announcements, you have decided you have to sit down in a room together.

Mr Mrdak : We maintain a very cordial relationship with the Victorian government, and we are looking to work with them. Minister Chester has been very clear on the need for a cooperative relationship. I think the Victorian government took the decision to publish the $1.4 billion in its own budget for which it had no funding.

Senator RICE:  How has the process with Victoria differed from the process with Western Australia? You seemed to reach agreement fairly quickly with the McGowan government as to how the money should be spent.

Mr Mrdak : As the government has indicated, the Western Australian government put forward a proposal which the Commonwealth accepted subject to all of the conditions that we discussed this morning in relation to further assessment.

Senator RICE:  So the difference was that they put forward a proposal to you that you then worked on, rather than just announcing a proposal?

Mr Mrdak : That is correct. There were a series of discussions with the West Australian—

Senator STERLE:  Eleven seats!

Senator RICE:  Staying with the Victorian investments—the $30 million for the business case for the airport rail ; who is that going to be given to?


Mr Mrdak : That is to be determined. We are looking to develop a joint process with the Victorian government. We hope to settle arrangements for the undertaking of that business case very shortly.

Senator RICE:  When you say that this is to be determined, what are the options as to who is going to be developing it?

Mr Mrdak : If Victoria is interested in working with us in partnership, we would envisage that it would be a joint Victorian-Commonwealth—

Senator RICE:  And what if they are not?

Mr Mrdak : Then the Commonwealth has indicated that it is prepared to work on the business case.

Senator RICE:  The Commonwealth itself would work on the business case?

Mr Mrdak : We would hope not to reach that position, clearly, given the Victorian knowledge. They are the owners of the rail system in Melbourne; we would hope to be able to work with them in relation to it.

Senator RICE:  Not the best arrangement, to announce allocation in the budget without having the Victorian government on side to—

Mr Mrdak : Again, in the Victorian budget, they announced a $10 million study into the Tullamarine rail link, which was Commonwealth money.

Senator RICE:  Do you know what route you will be evaluating?

Mr Mrdak : We will be looking at all routes. There was some planning done previously, as we discussed this morning, which had a heavy rail route from Southern Cross through the suburban network. Alternatively, there are other proponents for other systems which are more direct.

Senator RICE:  Will the business case be evaluating all of that?

Mr Mrdak : Yes, our intention is to look at all of the options and routes.

Senator RICE:  With $30 million for a business case—we heard before about the costs of business cases. Do you think that is going to be sufficient if you are evaluating—there must be at least three or four different options.

Mr Mrdak : Based on previous experience, and depending on the state of information that is available in Victoria, we believe that this should be adequate to undertake the sort of work that we envisage.

Senator RICE:  What sort of time frame does the federal government see? It is obviously a project that you think is important enough to be putting $30 million in. What is the sort of time frame that you would like to see airport rail developed for Melbourne if the business case stacks up?

Mr Mrdak : At this stage, the first stage is this planning work—the business case development—which the government has indicated would take about two years of work. That would enable us to reach a decision on timing of the project and find an optimal route alignment and business case which is favourable to a development. The government has then indicated that that would be a project which would be considered for funding under the $10 billion rail program.

Senator RICE:  Clearly, the federal government sees it as important and as a priority project.

Mr Mrdak : As does Infrastructure Australia, as they gave evidence this morning, in terms of this being one of their priority areas.

Senator RICE:  The Regional Growth Fund will invest $472 million over four years from 2017-18. What will the government's arrangements for this regional growth fund look like?

Mr Mrdak : $200 million of that regional funding will be provided to the Building Better Regions Fund, which is the government's flagship regional investment program. The remaining $272 million, as described in the budget papers, will be to support larger infrastructure investments in regional areas, particularly to support economic growth and jobs and also to ensure investment in regions which have growth potential and are going through periods where they are looking to move into other industry sectors.

Senator RICE:  We have the Building Better Regions Fund, which has governance arrangements and criteria—

Mr Mrdak : That is correct.

Senator RICE:  but how about for this new program? You have $272 million going into it.

Mr Mrdak : The minister is currently considering the approach in relation to it. A deal of work was done in the development of the budget on how the program might operate. Final decisions will be taken by the government very shortly.

Senator RICE:  When will those criteria be available?

Senator Nash:  Soon.

Senator RICE:  What does soon mean?

Senator Nash:  Soon means soon!

Senator RICE:  I presume that there will be an application process?

Senator Nash:  There will, indeed. I am hoping to have the guidelines finalised as soon as possible.

Senator RICE:  Does that mean a week, a month—

Senator Nash:  I am not going to pre-empt it. We are going to make sure that we get them right. I would imagine within the month or so. In terms of timing, I am not going to pre-empt that. I am hoping potentially in the second half of the year at some point.

Senator RICE:  For actual allocation or for accepting grant applications?

Senator Nash:  We still have to work through all of those details.

Senator RICE:  Of that $272 million, how much is going to be allocated in this financial year?

Mr Mrdak : The profile in the budget papers has $19.8 million in 2017-18.

Senator RICE:  That is for both the money that is going into the building better regions and this other—

Mr Mrdak : That is correct.

Senator RICE:  Would you expect that to be split fifty-fifty, as the $200 million versus the $272 million?

Mr Mrdak : That would not matter. The governments will shortly receive the assessment of the first round of building better regions. That will, obviously, inform the government's timing in relation to any future rounds of that program. I think, at this stage, the profile is across the forward estimates for the two components. Details of how that will split out are yet to be taken.

Senator RICE:  In terms of that $272 million fund, who will be the final decision-makers as to what grants are allocated?

Mr Mrdak : There is a ministerial panel, which determines regional grant applications under the BBRF.

Senator RICE:  But that is for the $200 million. For the $272 million will that be—

Mr Mrdak : Decisions are yet to be taken, but we would envisage the ministerial panel also being involved in the decision-making process for the other investment program.

Senator RICE:  You will essentially have a panel that will be assessing two streams of grant applications?

Mr Mrdak : The ministerial panel, as they do now, look at various regional programs as they come forward.

Senator RICE:  Essentially it is the one panel, and you will have these two streams of different grants—

Mr Mrdak : That is correct.

Senator RICE:  that will be assessed with different criteria, obviously

Mr Mrdak : Yes.

Senator RICE:  What compliance mechanisms will be in place to ensure that grant recipients comply and spend the money in accordance with the terms of the grant?

Mr Mrdak : We apply the Commonwealth grant guidelines as well as the provisions of the PGPA Act, which prescribe Commonwealth requirements in relation to grant administration. Our department applies those very successfully across a series of programs. We will do that with this, including evaluation and audit processes, once grants are acquitted.

Senator RICE:  The same process as is in place for other grants at the moment.

Mr Mrdak : We run a series of grant programs ranging from bridges right through to building better regions.

Senator RICE:  The ongoing saga of the Port Rail Shuttle in Melbourne—in February you said that you understood that work was about to start happening now that we have had the sale of the Port of Melbourne. I think you said that some work on the Port Rail Shuttle was imminent. Have you got any updates as to what is happening?

Mr Mrdak : My understanding is work is underway.

Senator RICE:  What work?

Mr Mrdak : To provide access into the Somerton terminal, by VicTrack. My understanding is that work is underway, which will enable the first stages of that rail shuttle to start very shortly.

Senator RICE:  Do you know any more details of what that work is, because some stakeholders that I have are not aware of that work actually beginning?

Mr Mrdak : It involves some track work into the site. I can take it on notice and get you a more detailed answer.

Senator RICE:  Okay. In terms of the Dandenong part of the Port Rail Shuttle, have you got any information about whether that is still within scope of the Port  Rail  Shuttle?

Mr Mrdak : I am sorry, I am not familiar with Dandenong.

Senator RICE:  With the Port Rail  Shuttle, my understanding of the works that are needed is you need to have the connections to Somerton in the north and Dandenong in the south-east, and Laverton or Derrimut in the west. There are works going on on the Dandenong line at the moment with the level crossings removal program, and we have been told that it does not look like they are taking into account the need for rail freight operations down to Dandenong.

Mr Mrdak : I am not familiar with the work that is being undertaken in relation to freight, but I will take that on notice.

Senator RICE:  You have no information about the freight connection into Dandenong and how that it is part of the Port  «Rail  Shuttle.

Mr Mrdak : No, I do not, sorry. I will seek advice from the Victorian government.

Senator RICE:  Okay. Thank you.