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A $2bn concessional loan from the Abbott government to pay for the WestConnex road project in western Sydney failed to protect federal interests or to speed up the project by up to two years, the audit office has found.

The Australian National Audit Office report, released on Tuesday, found that both the Abbott and Gillard governments committed at least $1.5bn to the WestConnex project while the project was still in a formative phase.

In May 2014 the Abbott government made a $500m advance payment and the $2bn loan, which the report said resulted in “the project being approved without there being any documented analysis and advice to ministers that the statutory criteria for giving such approvals had been met”.

Further, criteria for progress payments were set after milestones had already been achieved, ensuring payments flowed without providing accountability. The infrastructure department denies this charge.

The report concluded upfront payments “did not adequately protect the [federal] government’s financial interests”.

Labor transport spokesman, Anthony Albanese, said the use of a concessional rather than commercial loan had cost the government hundreds of millions of dollars which could have been spent on more ready projects.