Monday, March 27, 2023

McGowan coy over finishing date for Perth Airport rail link

Homebuyers are not the only ones dealing with construction cost blowouts, with the West Australian budget revealing the state government is also grappling with massive price hikes.

Premier Mark McGowan handed down his second budget as Treasurer on Thursday, gloating that the eastern states would be “green with envy” and “look like they swallowed a bumble bee” after he announced a $5.7bn surplus and that net debt had fallen to $29.9 bn.

While the state’s coffers appeared to be flush with cash — allowing for big spending on a health system in crisis and a $400 electricity credit for every household to ease cost of living pressures — budget papers have revealed a glaring problem for the government.

The State Government is injecting another $1bn into its Metronet rail projects, but only two of them are actually new — the Morrison Rd level crossing removal in Midland and the Canning Bridge bus interchange.

Other projects involve additions, cost blowouts and delays.

Suburban Home Construction Site
Camera IconThe state government is facing massive price hikes, just like people building homes. Matt Loxton Credit: News Corp Australia

In just one example, the long-awaited $1.86 billion rail line to Perth Airport, which was due to be finished by the end of 2020, will now open sometime this year.

Mr McGowan told reporters at the budget lockup on Thursday that he expected it to be some time mid-year, but on Friday he was even more vague.

“It’s due to open in coming months,” he told 6PR radio.

Mr Mcgowan Told Reporters At The Budget Lockup On Thursday That He Expected It To Be Some Time Mid-Year, But On Friday He Was Even More Vague.
Camera IconMr McGowan told reporters at the budget lockup on Thursday that he expected it to be some time mid-year, but on Friday he was even more vague. Credit: Ross Swanborough

Asked which month, Mr McGowan said: “They’re testing trains at the moment but it’s a massive engineering project … they do take time to achieve and I’m sure it’ll be open as soon as it’s ready.”

Mr McGowan said the total spend on Metronet’s 16 projects — only four of which have been completed so far — was about $6bn.

“The Commonwealth is giving us nearly half, so we’ve done pretty well at getting money out of Canberra for it,” he said.

“We’re in a very heated construction market — everyone understands that.”

Mr Mcgowan Said The Total Spend On Metronet'S 16 Projects — Only Four Of Which Have Been Completed So Far — Was About $6Bn.
Camera IconMr McGowan said the total spend on Metronet’s 16 projects — only four of which have been completed so far — was about $6bn. Credit: Kelsey Reid,The West Australian

Budget papers show the State Government will set aside $350m next year as a “cost escalation provision”.

“A high volume of projects approaching readiness for tender is occurring at a time when the construction market is experiencing capacity constraints due to continued supply chain disruption and challenges filling vacant positions,” the budget read.

“This represents a risk to the Asset Investment Program forecasts, including project costs and delivery time frames.

“In recognition of these risks, global slippage provisions have been included in the AIP to reflect the likelihood that individual project expenditure will experience delays.

“A global cost escalation provision has also been included in the budget forecasts to reflect the likelihood that some project costs will increase as a result of current cost pressures in the construction market.”

Generic Construction Images
Camera IconBudget papers show the state government will set aside $350m next year for cost escalations. NCA NewsWire/Andrew Henshaw Credit: News Corp Australia

Meanwhile, at least two residential builders have already gone bust, leaving many homebuyers stranded.

“Slow build times and escalating costs in the residential construction sector across the country, due to labor and material shortages and continued supply challenges, have placed some builders with fixed price contracts under stress,” the budget read.

“An increasing incidence of builders failing has the potential to test the capacity of the Home Indemnity Insurance Scheme, which the government of WA has fully underwritten since 2013-14.”

The balance of the HIIS fund is $64.1m as at the end of April.

Mr Mcgowan Delivered His State Budget In Parliament On Thursday.  Nca Newswire Sharon Smith
Camera IconMr McGowan delivered his state budget in parliament on Thursday. NCA NewsWire Sharon Smith Credit: NCA NewsWire

The budget did have some good news for the housing market though.

Mr McGowan announced a 50 per cent land tax concession for new build-to-rent projects from July 1 next year.

A stamp duty rebate of up to 100 per cent will be available for eligible off-the-plan apartment purchases valued at below $500,000 from June 1.

A density bonus will also be offered for developments that include at least five per cent social or community housing.

The government will further offer a new Keystart loan product for people who purchase medium and high density residential units in Metronet transport precincts and priority urban infill areas.

It comes after the Reserve Bank of Australia lifted interest rates by 0.25 per cent, with a warning more hikes are coming this year.


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