Australia scraps 50 road, rail projects to cut costs

Australia will scrap more than 50 road and rail projects across the country to try and prevent a multibillion-dollar infrastructure pipeline from spiraling out of control and keep a lid on persistent inflation pressures.

Infrastructure Minister Catherine King announced Thursday that dozens of programs would be canceled while others would be merged to gain efficiencies. The move comes after an independent review found the government would be unable to fund its infrastructure plans out of the current A$120 billion ($78 billion) budget.

The review, also released by King on Thursday, showed there was a cost blowout of more than A$30 billion and called for 82 projects to be axed. Among the projects facing a funding cut are a fast rail link between the two largest cities in the state of Victoria — Melbourne and Geelong — and a road-based freight network in Western Australia.

No states or territories will lose out on infrastructure spending as a result of the changes, King said — though she added that the overall value of the canceled projects was in the billions.

“We know we have got considerable constraints when it comes to labor costs and supply constraints as well, and as the IMF has said, we don’t want to add to inflation,” King told reporters in Canberra.

Australia’s center-left Labor government is trying to manage a complicated balance of providing the infrastructure needed for a swelling population and kickstarting moribund productivity. But at a time of a crunch in skilled labor, it’s worried that too much building will exacerbate a housing shortage and further fuel inflation. 

The International Monetary Fund warned this month that spending by state and territory governments on major infrastructure projects threatened to worsen inflation and keep interest rates higher for longer.

Ahead of her press conference, King warned in a statement that new funding for infrastructure projects might be required in the government’s Mid-Year Economic Forecast, expected to be released in coming weeks.

As part of the review, the government released a policy statement on Tuesday which laid out new guidelines for infrastructure federal funding. It also restated a preference for a 50/50 split for major infrastructure funding between the state and federal governments.