Audit report finds Coalition inflated budget deficit during its first year by transferring $1.5bn to Victoria for toll road despite warnings project hadn’t been fully assessed

This article is more than 4 years old

This article is more than 4 years old

The Abbott government inflated the deficit during its first year in power by transferring $1.5bn to Victoria for the East West Link despite “clear advice” the payments were not yet needed, an audit report has found.

The government approved the funding even though it had received departmental warnings that neither stage of the Melbourne project had proceeded through a full assessment of its merits, the Australian National Audit Office (ANAO) said in the report issued on Monday.

The report raises serious questions about the federal government’s handling of the 18km project, which was also championed by the former Victorian Coalition government but was subsequently scrapped by the Andrews Labor administration.

Tony Abbott promised during the 2013 federal election campaign to provide $1.5bn to Victoria for the East West Link project, and then approved funding for the first stage during the 2014 budget process. The government also approved an extra $1.5bn for the second stage, the report said.

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Advance payments of $500m for stage one and $1bn for stage two were made on 30 June 2014. This was the final day of the 2013-14 financial year, a period that included the changeover from the Labor to Coalition governments.

The report suggested the early payments provided the Abbott government with “budget presentation benefits” by increasing the deficit for 2013-14 but decreasing the deficit in later years.

“The Department of Infrastructure and Regional Development ... provided clear advice to government that the $1.5bn was being paid in advance of project needs, and proposed an alternative payment approach that aligned payments with project progress,” the ANAO report (PDF) said.

“Similarly, the Department of the Prime Minister and Cabinet provided the then prime minister with advice on the merits of making advance payments in relation to the East West Link project, and the implications of such an approach more broadly in relation to infrastructure project decision-making.

“The decision to provide $1.5bn in advance provided budget presentation benefits to the government by bringing forward the payments which resulted in a larger budget deficit for 2013–14. None of the $1.5bn in advance payments had been spent by Victoria prior to the cancellation of the East West Link project. Interest earned on the advance payments to the end of October 2015 is estimated to have been more than $49m.”

The ANAO, which investigated whether the commonwealth took proper steps to obtain value for money, focused its criticism on the government’s handling of the project at a political level.



This is because the report found ministers had received “well-considered departmental advice, and that Infrastructure Australia’s assessment processes had been bypassed”.

The ANAO made only one recommendation, urging the Treasury to begin action under the federal financial relations framework to recover the advance payments from Victoria. The report said funds had not been recovered as of October.

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Labor’s infrastructure spokesman, Anthony Albanese, who requested the audit, said the report highlighted “the complete collapse of proper process in funding major infrastructure projects” under the Coalition government.

Albanese said the advance payments were a case of the federal government “playing games with commonwealth taxpayers’ money in order to assist their colleagues in the Coalition in Victoria” before the 2014 state election.



The Greens MP for Melbourne, Adam Bandt, said Abbott and the former Victorian premier, Denis Napthine, should face scrutiny “for intentionally wasting billions of dollars in public funds for nakedly political purposes”.

“We now know Tony Abbott made a ‘captain’s pick’ by giving billions of taxpayers’ dollars to his Liberal mates in Victoria without a business case and against the advice of public servants,” Bandt said.

The East West Link would have connected the Eastern Freeway to the Western Ring Road in Melbourne. Abbott has previously argued the project would “liberate people from the tyranny of hours and hours spent in traffic jams”.

The audit found funding approval for stage one, the eastern section, was given by Abbott some time between 7 May and 12 May 2014. At this time the infrastructure department was yet to assess the revised project proposal report, which it had only just received from Victorian officials.



The decision was made even though the federal government’s top infrastructure advisory body still had unanswered questions from July 2013 about the project’s short-form business case. Infrastructure Australia, the report said, “did not receive the full business case (which was dated 30 June 2013) until 7 July 2014”.

The Victorian government had not included the second, western stage in its 2013 submission to Infrastructure Australia and instead approached Abbott directly in early 2014. By doing this, it secured funding approval “without this proposal having been presented to, or assessed by, Infrastructure Australia”.

The report said the Victorian government did not require such substantial funds so early. Total spending on the second stage was not expected to reach $1bn until 2016–17.



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The funding timetable for the second stage had raised eyebrows. Government bureaucrats told a Senate estimates hearing in May 2014 that the commonwealth had earmarked $1bn for stage two in the 2013-14 financial year, nothing in the following four years, and then $500m in 2018-19.

At the time, Guardian Australia asked Warren Truss’s office why the funds were not being allocated to coincide with construction beginning. The deputy prime minister’s spokesman replied: “The upfront money will be given to the Victorian government so they can get going on the project.”

On Tuesday a spokesman for Truss defended the government’s support for the project on the grounds of its “transformative positive impacts”.

“Cabinet approval gave the full authority for this project to proceed,” he insisted.

Abbott’s office did not respond to a request for fresh comment.

Government agencies that were provided with a draft version of the ANAO report did not dispute any of the key findings.

The infrastructure department noted the positive findings about the department’s “timely, thorough and appropriate advice”, while the finance department expressed its support for the recommended efforts to recover the funds from Victoria.

Infrastructure Australia said the report “accurately reflects Infrastructure Australia’s role in the analysis of the East West Link project”.

A report by the Victorian auditor general, published last week, criticised the former Coalition and current Labor state governments for their handling of the project.