Illustration: John Spooner.
I vote we change the subject. There are other issues more important to our lives than the Kevin and Julia soap opera. On some of them, we don't have the consensus we need to resolve them. These are things we should talk about.
One of the most important is the issue of how to pay for the infrastructure we need. Melbourne's roads are already congested. Many outer areas have poor public transport. The city is forecast to add more than 1.25 million people in the next 20 years.
Most of us want more new infrastructure. But who should pay for it?
Two facts stand out. First, all infrastructure must be paid for by taxpayers or by users. And unless you like paying high taxes, it is better that, where possible, the user pays.
Second, the state government says it will not increase infrastructure spending from taxes. On the contrary, it plans to reduce it - sharply.
The budget papers show it plans to reduce net infrastructure investment by a third over the next three years: from $5.6 billion a year to just $3.7 billion. That's less than 1 per cent of the forecast state gross product (GSP), a figure that returns us to the austerity of the Kennett/Stockdale era.
Even in the long term, the government pledges to invest only 1.3 per cent of GSP on average: $4.5 billion a year in today's money. Put against the needs, that's peanuts.
The East-West Link is the state government's flagship road project. How much it will cost will depend on how it is designed (How much will be underground? Will tunnels head into the city?). But say $15 billion, and we're probably at the right footy ground. The Melbourne Metro, another priority, will cost the same. Grade separations for the 175 suburban level crossings would cost another $30 billion.
Building the missing section of the outer ring road between Greensborough and the Eastern Freeway would cost $6 billion, says a report for the Property Council of Victoria by Vince FitzGerald of the Allen Consulting Group. A rail link to Melbourne Airport would cost $3.5 billion, upgrading the Melton rail line would cost $1.3 billion, and new rail lines are also proposed to Whittlesea, Doncaster, Rowville, Hastings and Avalon airport.
Who will pay? If it's not taxpayers, it must be the users. And if it's not the users, then it won't be built.
But ever since Kennett and Stockdale, every Victorian government has been a slave to the idea that the state must have a AAA credit rating. That means it must keep its debt low. Under Bolte, Victoria's debt averaged 50 per cent of GSP. Now it is 10 per cent. You can't borrow to build with a AAA rating. Which do we want most: the things we want to build, or the AAA rating?
The AAA rating allows us to pay a slightly lower interest rate. Victoria can issue bonds for 30 to 50 basis points less than Queensland, which lost its AAA rating when former premier Anna Bligh opted to borrow and build, to put the infrastructure needs first. Queensland voters did not reward her.
Last week EastLink's boss Dennis Cliche suggested one way to break the impasse over funding the East-West Link: sell the Eastern Freeway to be a privately owned toll road, and use the money to help pay for the East-West Link. Cliche cheekily offered to buy it for $1 billion. Transport Minister Terry Mulder responded: ''Tell him he's dreaming. [We have] no intention of tolling the Eastern Freeway.''
Cliche was undeterred. ''My objective is to get it on the agenda and get people talking about it, so that a government will have the chance to do it one day,'' he told Neil Mitchell on 3AW.
In Sydney, a different government has a different approach. The Sydney Morning Herald reports that Premier Barry O'Farrell plans to reimpose tolls on the M4 from western Sydney to help pay for it to be widened and then ploughed under Parramatta Road in his own road project, WestConnex.
Why is O'Farrell willing to put tolls on the M4, yet Denis Napthine won't put tolls on the Eastern Freeway? Sorry to be cynical, but I suspect one reason is that the M4 mostly serves what are normally Labor seats, whereas the Eastern Freeway runs into Liberal territory.
But Cliche's proposal had two parts: selling the Eastern Freeway, and putting tolls on it. Selling it would give us a wad of cash to reduce the amount we need to borrow to build the Link. Tolling the road would provide a stream of money to pay back what we borrowed. They're separate ideas; you can do the second without the first.
Let's do the sums. Tony Abbott has offered $1.5 billion, apparently regardless of whether or not it has the approval of Infrastructure Australia and passes cost-benefit analysis - which it has yet to do. That is a bad omen for the way an Abbott government is likely to operate. It's also only 10 per cent of the likely cost.
We can assume it will be a toll road, privately built and operated. But underground tunnelling is expensive. To pay for it, the tolls would have to be high, and if they are high, they will drive traffic elsewhere.
Remember: EastLink is the only toll road in recent years to succeed. Sydney's Cross-City Tunnel and the Lane Cove Tunnel lost a fortune for their investors. Brisbane's new Airport Link now carries just 48,000 vehicles a day, a third of its target.
Infrastructure Australia warns that new toll roads will pose a risk for investors until there are city-wide policies - congestion taxes, tolls on all motorways - to discourage drivers from avoiding them. That requires a lot of hard decisions ahead.
Kennett, who brought in the private sector to build and finance CityLink, is now one of many telling the government to do the opposite. With its bonds issuing at 3.5 per cent, it should borrow the money itself, contract out the construction and operation of the road, but assume the financial risk - because that is where government has a comparative advantage.
But toll the Eastern Freeway, because that will reduce the toll drivers need to pay on the new section. And if you lose the AAA rating, so be it. The benefits will outweigh the costs.
Tim Colebatch is economics editor of The Age.
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