‘Astonishing’: cost of Inland Rail doubles to $30bn as review savages Coalition over project

The predicted price tag of the Inland Rail megaproject has almost doubled in two years to more than $30bn, as an independent review savages the former Coalition government's handling of the plan.

In her independent review of the Inland Rail, commissioned by the Albanese government last year and released on Thursday, Dr Kerry Schott also flagged further delivery delays of at least four years.

Envisioned as a freight rail link between Melbourne and Brisbane through an inland corridor that is capable of running double-stacked freight trains between the two cities in 24 hours, the Inland Rail project has attracted criticism from experts and regional communities over the planned track alignment in light of flood risk and other environmental concerns.

In 2020, the project's cost was estimated at $16.4bn with a completion date of 2026-27, however, this has now grown to a projected $31.4bn with an expected completion date of 2030-31.

"This is an astonishing estimated cost increase of almost double in just two years," the review said, noting that the reasons for the cost increase are "mainly an increase in scope caused by immature preliminary designs and approval requirements, delays due to the prolonged approval processes, and recent escalations".

Despite the $15bn cost estimate increase and years of delays, Schott warned she was not confident her review was able to capture the full extent of cost blowouts and accurate delivery timeline.

"There is insufficient certainty about the completion date and the final cost to have confidence in the current estimates. There are a number of reasons for this regrettable situation," Schott said in her review that was completed in January but made public on Thursday.

"I remain deeply worried about the level of scope maturity across the project as a whole and as a result the future impact on project cost and completion time estimates remains difficult to ascertain," Schott said.

Schott noted that state governments and rail freight companies were yet to settle on the end points of the Inland Rail route, but that despite this, construction had already begun. "Somewhat surprisingly the project has commenced delivery without knowing where it will start or finish."

Schott's report also criticises the governance of the Inland Rail project through the Australian Rail Track Corporation (ARTC), the commonwealth-owned company that also operates rail assets in various states including the existing Sydney-Melbourne passenger and freight railway.

"The problem is that the Board and its Sub-Committee do not have adequate skills to oversee this project. Despite an informed request by the Chairman of ARTC to the then-Minister responsible, replacement appointments to the Board did not provide the skills required."

The review is also scathing of the former government ministers responsible for the ARTC, the Nationals MPs Michael McCormack and then Barnaby Joyce, for board appointments that lacked the skills required and requested by the ARTC.

"While ministers, as shareholder representatives, have every right to appoint whom they choose as directors they also have an obligation to ensure that the business is governed properly and this means paying attention to the skills that are needed. Shareholder ministers of the former government did not meet that obligation," the review said.

Schott was also critical of Joyce for failing to approve the ARTC board's choice for CEO of Inland Rail.

Schott makes 19 recommendations in her review, including changing how Inland Rail is governed away from being managed as a division of the ARTC and instead a subsidiary company be established for the sole task of delivering the project. A CEO of Inland Rail should be "filled substantively as soon as possible" and would report to the subsidiary board and attend the main ARTC board meetings.

"This structure removes the very real risk of the ARTC business being distracted by the Inland Rail project," the review said, warning the current structure could impact the "business-as-usual operations of ARTC".

Recommendations also include: investigating bypassing towns where additional train traffic could create noise issues, and building intermodal terminals in Beveridge and Truganina in Victoria, as well as in Ebenezer, Queensland and Parkes, New South Wales, because double-stacked freight cannot be feasibly operated all the way to the ports in Melbourne and Brisbane.

The review also recommends: the shareholder minister address skills shortages on the ARTC board; appointing an independent value estimator to help provide the project with budget certainty in coming years; appointing an independent specialist "to review the design solutions" and work with the ARTC to "define exactly what the scope of this project is"; and reviewing risk management systems to allow for the "timely escalation of key risks".

Despite the concerns raised, Schott found "the importance of this project is widely accepted" and outlined a way forward. She suggests a staged delivery schedule by splitting the project in two parts, with the initial focus to be completing the Melbourne to Parkes section by 2027.

The review also raises questions about the ARTC's future financial position, noting "revenue over future decades may decrease as coal exports decline".

Catherine King, the minister for infrastructure, transport and regional development, said Schott's report was an "indictment of the Liberal and National parties' approach to government".

"To leave a project without a start or end point, with a significant budget blowout, and a board without the skills it required is shameful."

King accused the former government of letting down regional communities and businesses "which have already invested time, effort and money in the prospect of Inland Rail", and said the government had been left to "clean up this latest mess".

Katy Gallagher, the finance minister, said "to have the cost nearly double to more than $30bn in two years, and not even be able to have confidence in the figures is - as Dr Schott said - astonishing".

"For the former government to ignore obligations to ensure the ARTC was properly governed is delinquent," Gallagher said.