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Victoria kick-starts Melbourne Metro project

The state government has committed A$1.5bn in pre-construction funding, with the private sector expected to get involved at a later stage.

Victoria Premier Daniel Andrews has said that A$1.5 billion (€1.1 billion; $1.2 billion) in funding will be set aside in next week’s state budget for the Melbourne Metro project, which involves constructing a new rail tunnel beneath Melbourne’s central business district (CBD).

The funding will be spent on planning and designing the tunnel, property acquisition and moving gas, water and transport infrastructure out of the way. Construction is scheduled to begin in 2018.

However, with the project expected to be worth between A$9 billion and A$11 billion in total, there has been criticism from political opposition that there is no clear sign of where the remaining funding will come from. Prior to being elected Premier in November last year, Andrews had indicated that he expected one-third of the funding to come from the private sector.

Infrastructure investors will likely take heart from Andrews’ apparent commitment to the project, particularly given the recent decision of the new administration to shelve Melbourne’s proposed East West Link, a multi-billion toll road project.

It had been feared that Andrews’ Labour government would legislate to avoid compensation due to members of a private consortium that had won the contract to build the link. However, this was ultimately avoided when the government agreed to pay A$339 million to terminate the contract and cover costs that had been incurred.

Brendan Lyon, chief executive of lobbying group Infrastructure Partnerships Australia, said the Metro announcement represented “an important signal to business and the community that the Andrews Government is serious about growing Victoria following the cancellation of the East West Link”.

He added: “The Andrews Government needs to deliver a strong, ambitious and positive infrastructure agenda in the May budget to restore confidence and today’s announcement is an important positive first step.”