Prime Minister Anthony Albanese will pour $3.8 billion into the Suburban Rail Loop despite inflation and debt fears, money that Labor will place in a “locked box” only to be spent on a project that federal and state Coalition parties have remained steadfast against.
Giving the Allan government a boost seven months out from the state election, Albanese will on Friday announce the Commonwealth’s contribution to the tunnel between Cheltenham and Box Hill will rise to $6 billion, as flagged by this masthead last week.
The commitment, which is still short of a third of the project’s $34.5 billion price tag which Premier Jacinta Allan has sought from Albanese, raises questions about what will happen to the money if Opposition Leader Jess Wilson wins in November.
She has vowed to pause and review the project. But an Albanese government source said its cash, which comes at a time when the government is trying to rein in spending on inflated transport projects to prioritise housing, was tied to milestones in the SRL and would not be seamlessly transferred to alternative projects.
“This money is for this project,” the source said.
The situation has the hallmarks of the dispute over the proposed East West Link road project. Then premier Daniel Andrews cancelled a contract for the road, prompting the prime minister of the day, Tony Abbott, to declare the Commonwealth’s $3 billion was in a locked box.
The standoff continued for years, and in the days before Albanese’s 2022 election win, Andrews blasted the locked box that was by then under Scott Morrison’s control as a “dog box”. Federal Labor’s then infrastructure spokeswoman Catherine King, asked at the time about her plans for the East West Link funding, said her party would “work with whoever is in power to actually deliver projects”.
New agreements could be struck between the Albanese government and any new Coalition government in Victoria, but Albanese is personally attached to the SRL.
Overriding anxiety about the cost and merit of the project from many of his own MPs, Albanese said the SRL was “a game changer for the city of Melbourne”.
“Ensuring Victorians can get into greater Melbourne and across suburbs, rather than having to go into the CBD then back out, helps speed up travel times, get cars off the road and increases opportunities for businesses in Melbourne’s east,” he said.
On top of the $11.5 billion Allan is ultimately expecting from the Commonwealth, the state government has vowed to cover another third of the total costs, with the remaining third to be recouped through taxes and charges labelled as value capture.
The project’s $34.5 billion price tag has been heavily questioned, given construction costs have soared by at least 22 per cent since it was proposed in 2019. This does not include the recent impacts of conflict in the Middle East. In some areas, builders have warned of price increases of 35 per cent.
But the contracts signed so far have remained within $34.5 billion, and tunnelling is expected to begin this year. The federal cash was already accounted for in this week’s state budget.
It also provides a political win for Allan, who has long campaigned for more federal funding and pushed ahead with the expensive project despite criticism about its impact on the state’s finances.
“In the Albanese Labor Government we have a partner in Canberra who gets what our growing state needs,” Allan said.
Federal opposition infrastructure spokeswoman Bridget McKenzie said it was improper for Labor to suggest it would withhold money from a duly elected Coalition government.
“This is solidarity on steroids,” she said, reminding voters about Labor’s relationship with the CFMEU in the Big Build.
“Why should taxpayers from other states be funding the reelection of the Victorian Labor government?”
“This actually goes to the heart of state sovereignty.”
Albanese’s announcement comes a week after this masthead revealed federal cabinet was closing in on a figure between $2.5 billion and $4 billion, several billion less than Allan asked for in a series of meetings with Albanese.
Spending from the Commonwealth’s $120 billion infrastructure pipeline was expected to be slowed down to deal with inflation, however the prime minister had been determined to provide additional funding to the rail loop.
Sources, speaking anonymously to detail confidential discussions, said last week that Labor ministers including King, the infrastructure minister, had previously been sceptical about the merits of the project. One Labor source said it was not supported by many Victorian federal MPs.
Early last year, Infrastructure Australia described the SRL’s benefits as “overstated”, expressed “low confidence” in its cost estimates, and talked up “exit strategies”. In a reversal, the independent infrastructure advisory said in March this year that the SRL was a priority and should be funded.
When the initial $2.2 billion of federal funding was provided, it was released under the stipulation that it was for “no regrets” items such as land acquisition and improvements to utilities.
King said the project would bring different transport modes together and cater for population growth.
“This investment by the Albanese Government in nationally significant infrastructure such as SRL boosts productivity and accessibility for Victoria,” she said.
The state budget confirmed that $6.5 billion has already been spent on SRL East, including $2 billion in early works. This will ramp up as tunnelling gets underway, with $3.2 billion expected to be spent in 2026-27 financial year.
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Paul Sakkal is Chief Political Correspondent. He previously covered Victorian politics and won a Walkley award and the 2025 Press Gallery Journalist of the Year. Contact him securely on Signal @paulsakkal.14.Connect via X or email.
