NSW government set to delay mega projects amid COVID-19 pressures

The NSW government is preparing to delay several multi-billion dollar mega projects due to rapidly escalating costs and labour shortages,leaving commuters on Sydney’s northern beaches and in fast-growing suburbs around Olympic Park facing slower journeys for years longer than originally promised.

The controversialBeaches Link motorway and an extension of theParramatta light rail line are among the major projects likely to be deferred,as a senior government minister warns that rushing ahead with major builds would be “reckless”.

Infrastructure Minister Rob Stokes,left,and Premier Dominic Perrottet inspect a new rail tunnel late last year.

Infrastructure Minister Rob Stokes,left,and Premier Dominic Perrottet inspect a new rail tunnel late last year.Rhett Wyman

Infrastructure and Cities Minister Rob Stokes confirmed the government was conducting a review into its major projects. He said the government intended to deliver the projects it had promised,but their timing needed to be reconsidered before committing to liabilities reaching into the “tens of billions”.

“I am being upfront and saying government is looking at all of these major projects right now,” he told theHerald.

“Volatility in cost of materials,equipment,and the shortages in skilled labour means it’s really not the right season to commence more mega projects immediately.”

While the Beaches Link is likely to attract some Commonwealth funding in the federal budget on Tuesday,it is unlikely to alter the likelihood of the state government delaying the project.

Mr Stokes said:“This is actually not a problem with money – this is a problem with market capacity.”

Moves by state governments to fast-track mega transport projects to head off recession during the pandemic has resulted in an overheated construction market on Australia’s east coast. A breakout in inflation globally has added to the risks of cost blowouts in projects.

NSW government finances are also under intense pressure after two years of pandemic spending. The state recorded a$19.5 billion deficit in December last year,before the Omicron wave.

The government subsequently announced $1 billion in support for businesses disrupted by Omicron,which pushed the state further into the red.

TheHerald has revealed that the NSW government’s signature City and Southwest Metro rail line has blown out by at least $2.2 billion,and that the cost of the first stage of theM6 motorway had surged by $400 million.

The NSW government will need to delay several major infrastructure projects.

The NSW government will need to delay several major infrastructure projects.Christopher Pearce

A year out from the next state election,Mr Stokes said the government would reconsider the timing of projects on which it had yet to make an investment decision,and would be making an announcement in the coming weeks.

“The government’s dance card,if you will,for mega projects is full right now. Our project partners are run off their feet,” he said.

“Clearly,we would have to have our heads under the sand if we didn’t recognise the impact on costs of recent events,and that means that some projects make sense to do immediately more than others.”

While he did not name specific projects,two of the biggest without an investment decision are the Beaches Link and the second stage of Parramatta light rail from Camellia to Sydney Olympic Park.

Mr Stokes maintained the government was committed to building the multi-billion dollar tunnel between North Sydney and Balgowlah – which itpromised in 2017.

“It is a government commitment,and we are committed to delivering it,but … there is an argument that right now is not the time to be doing more of the really big ones,” he said.

“It would be reckless to not ask these questions before committing government to liabilities potentially in the tens of billions of dollars.”

Instead,the government will look to invest in smaller “tier-two” projects,which include road upgrades and active transport links.

Investment decisions have yet to be made on the second and third stages of theM6 motorway in Sydney’s south,and the outer Sydney orbital motorway in the city’s west.

NSW Labor leader Chris Minns said the government had lost control of its trademark infrastructure pipeline.

“This government is now walking away from its centrepiece;its infrastructure program,” he said. “They’ve got an obligation to be upfront about what promises they’re breaking to the people paying the bills – the taxpayers of NSW.”

Mr Stokes said the impact of the pandemic on Australia’s population growth had provided the government more time to deliver its major projects.

“It makes sense to reprofile – to do the bits that you can do – the most efficiently. And if that means you take a little bit more time to do the ones that you’re going to pay a premium for right now,well then that’s just good use of taxpayer money,” he said.

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Tom Rabe is a State Political Reporter with The Sydney Morning Herald.

Matt O'Sullivan is transport and infrastructure editor at The Sydney Morning Herald.

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