The Turnbull government has committed to building Sydney’s second airport.

It made the decision after Sydney Airport Group, the owner of Sydney airport, declined the government’s offer to build the new airport at Badgerys Creek in the western suburbs.

Sydney Airport Group told the stock exchange on Tuesday it had formally passed up the opportunity. It had obtained right of first refusal to build the airport in negotiations with the Howard government in 2002.

“Sydney airport’s decision not to accept the [western Sydney airport notice of intention] on the terms provided is in the best interests of our investors who represent millions of Australians through their superannuation funds,” Sydney airport’s chief executive, Kerrie Mather, said in a statement.

“Despite the opportunities that WSA will present, the risks associated with the development and operation of WSA considerable and endure for many decades without commensurate returns for our investors.”

Malcolm Turnbull said the commonwealth government would now build the airport, with details to be announced in next week’s budget. Labor said in February it would support the government if it decided to build the airport itself.

“The airport will be a major catalyst for jobs and economic growth in western Sydney, injecting more than $1.9bn into the economy during the construction phase alone,” Turnbull said on Tuesday. “It is expected to deliver 9,000 new jobs to western Sydney by the early 2030s, and 60,000 in the long-term.

“It is a vitally important project for western Sydney, for Sydney, and the nation, which is why the Coalition government ended decades of indecision by committing to the project in 2014.



“The government has worked carefully to meet our obligations and we have been planning for either contingency – acceptance or rejection by Sydney Airport Group,” he said.

But Mathers said the terms of the right of first refusal provided Sydney airport with up to three months to review the “material terms” upon which the commonwealth government elected to develop and operate WSA itself. If the terms were more favourable, Sydney airport would have the option to develop and operate the airport on those terms, she said.

The government had put pressure on the company to make a decision on the airport at Badgerys Creek. The federal urban infrastructure minister, Paul Fletcher, warned in December that the government had “no intention” of letting negotiations drag out.

“It has four months, until mid-May, to accept the ­notice of intention,” Fletcher said, according to reports. “If Sydney Airport Group accepts, it will build and ­operate western Sydney airport. If not, the government is prepared to do it.”

Anthony Albanese, the shadow infrastructure spokesman, has previously said the Turnbull government could form a company to build the airport and later sell the company to a private operator.

“This model is similar to that which is being used to deliver the Moorebank intermodal project established by the former Labor government,” he said in February.

Rod Sims, the chairman of the Australian Competition and Consumer Commission, said late last year it would make sense for the government to build the airport itself, before selling it at a later date.

The Blue Mountains mayor, Mark Greenhill, has blasted the government’s decision to build the airport, saying it was a desperate effort to showcase a short-term economic win at the cost of a long-term social and economic disaster.

“Sydney Airport Corporation’s decision not to accept the Australian government’s offer to build and operate the western Sydney airport vindicates the community opposition to this white elephant project that is decades in the making,” he said on Tuesday.

“I wholeheartedly agree with Sydney Airport Corporation that the risks associated with this development and operation of western Sydney airport are considerable and will endure for many decades.”



