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EXCLUSIVE

Melbourne Metro to boost Australian economy: Infrastructure Australia

Richard Willingham

The multibillion-dollar Melbourne Metro rail project will boost the Australian economy, the nation's top infrastructure advisers have declared, placing pressure on the Turnbull government to increase funding to Victorian major projects.

The business case for the $10.9 billion project to build twin nine-kilometre rail tunnels under the city, linking Kensington to South Yarra, has been assessed by Infrastructure Australia and has been placed among the highest priority projects for the nation category.

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Melbourne Metro tunnel update

Early works begin on Melbourne's Metro Tunnel which is to be Victoria's largest public transport project.

"Overall, Infrastructure Australia is confident that the benefits of the project will exceed its costs and that the proposed solution will provide a net benefit to the Australian economy," the body's project evaluation says.

The approval by the nation's independent infrastructure adviser has restarted calls from Victoria for Canberra to contribute more taxpayers' dollars to projects in the state.

Federal infrastructure funding has caused major tension between the Turnbull and Andrews governments, with the state complaining Victoria was being short changed.

The federal budget update in December revealed Victoria was getting just 77 cents in every $10 allocated to the states for infrastructure, despite the fastest population growth in Australia.

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Mr Turnbull, a keen user of public transport, has previously said the Metro project has merit but the business case needed more work, especially around "value capture", a process which seeks to recover some of the increased land values or revenues a project generates in the private sector.

Canberra has also said that it has offered more than $870 million from the asset recycling scheme, to be paid for the sale of the Port of Melbourne, to be used towards the rail tunnel, a policy rejected by Spring Street.

At last year's state budget the Andrews Labor government declared that it would fund the multibillion dollar project itself – but still said any federal contribution would be welcome.

Infrastructure Australia positively assessed the state government's business case for Metro, which says for every dollar invested there will be a return of $1.10, but when wider economic benefits are considered the return is $1.50.

Nearly 60 per cent of the projected benefits are for public transport users, with road users also set to benefit from the project by decreasing their reliance on cars.

Infrastructure Australia says the methodology of using wider economic benefits is still being developed and that the business case does not quantify urban renewal benefits generated by the project including improved land use.

Potential tram cost savings and a boost to retailers at new stations is also not quantified.

Victorian Liberals, including federal ministers, have said Commonwealth cash should only be given to the project if South Yarra station is included in the new link – a plan rejected by Premier Daniel Andrews as too expensive and of little benefit.

"The project option analysis suggested that a new South Yarra Station not be included in the project because of its significant cost and limited transport benefits," the report says.

Victorian Public Transport Minister Jacinta Allan said Infrastructure Australia's assessment confirmed what the government already knew.

"(That) these projects stack up, that they are desperately needed and that we need to get on and build them," Ms Allan said.

"Malcolm Turnbull needs to stop being a Prime Minister for Sydney and give Victoria it's fair share of infrastructure funding."

Federal Minister for Urban Infrastructure Paul Fletcher has already welcomed Victoria's commitment to fully fund the Metro project.

"The inclusion of this project on the Infrastructure Priority List demonstrates the important work undertaken by Infrastructure Australia in identifying and assessing priorities that are capable of being funded independently of the federal Government," Mr Fletcher said.

Infrastructure Australia chief executive Philip Davies said there was a clear need for investment in high-capacity, high frequency public transport services.

"With the populations of Melbourne, Sydney, Brisbane and Perth projected to grow by more than 30 per cent in the next 15 years; we need world-class mass transit systems integrated into existing transport systems in our major cities to enable people to efficiently travel for work and leisure,' Mr Davies said.

A $440 million project to upgrade the Murray Basin freight rail network, which both Victoria and Canberra have already committed funds towards, has also been positively assessed by IA.