Albanese to pledge billions to Melbourne’s Suburban Rail Loop
As inflation fears and war-induced construction costs force the Albanian government to pull back from road and rail projects, Prime Minister Anthony Albanese will overrule doubts among his own MPs and pour billions of dollars into the Suburban Rail Loop.
Spending on a $120 billion federal infrastructure pipeline will be slowed in the budget, according to five sources familiar with the latest deliberations of Labour’s budget sniper gang. Ministers are aiming to cut near-record spending to tackle inflation, which was soaring even before the war in Iran.
Albanese’s focus on funding Melbourne’s 90-kilometre Suburban Rail Loop, an orbital rail line that will transform Melbourne’s middle-ring suburbs into high-rise centres, is at odds with Labour’s quest for savings.
Albanese is expected to pledge new federal funding before the budget on May 12. Victorian and federal sources said the Commonwealth would commit between $2.5 billion and $4 billion; this was several billion less than the amount Victorian Premier Jacinta Allan had requested in a series of meetings with Albanese.
The war in Iran has increased already high construction costs, and the government expects to cut spending and potentially delay some projects. It hopes to ease tensions in the economy and counter criticism from economists and the opposition that the government has raised interest rates and are likely to rise again next week.
The move could also help free up resources to build more homes. The government will fall nearly 200,000 homes short of its target of building 1.2 million homes by the end of the decade, based on current expectations. Housing Minister Clare O’Neil warned this week that the impact of the war on construction costs could lead to 33,000 fewer homes being built over the next three years.
In its 12 May budget, which Albanese and Chalmers described as the most important budget to date, Labor did not commit to banking savings worth more than it added to spending.
The cabinet’s razor gang has been holding intense, hour-long meetings after Labor spent near record levels last term. Ministers are being briefed on cuts and restrictions to their portfolios as Chalmers aims to create a tight budget that will deliver tax and efficiency reform. Government spending on infrastructure has been blamed for contributing to high inflation.
Sources said Labor ministers, including Infrastructure Minister Catherine King, had previously expressed skepticism or caution about the benefits of the Suburban Rail Loop, a project first proposed by former Victorian premier Daniel Andrews ahead of the 2018 state election.
Lawmakers, including King, worry the project could suck up the entire infrastructure budget and deprive other projects. Victoria’s Labor MPs and Victorian Deputy Premier Ben Carroll are also concerned about SRL.
King supports funding the project, although he critically examines Victoria’s arguments for building the project. Ballarat’s senior minister is a member of the same left wing as Albanese, a self-proclaimed infrastructure enthusiast.
Allan and Andrews want the Commonwealth to fund a third of the $34.5 billion Suburban Rail Loop East section from Cheltenham to Box Hill from 2021. The $34.5 billion estimate was prepared in 2019, and estimates for subsequent episodes vary widely.
So far, only $2.2 billion in federal funding has been provided, provided it’s for “no regrets” items like land acquisition and utility improvements, leaving a $9.3 billion shortfall.
Albanese leads another project, High Speed Rail Sydney to NewcastleThis would cost up to $90 billion and is considered unrealistic by transportation policy thinkers. The federal government is also committed to funding Western Sydney International Airport.
The prime minister has previously used his power to manage political issues by vetoing colleagues on gambling reform, environmental laws, census questions, mandatory prison sentences for hate crimes and expanding the size of parliament.
“SRL is the only project Victoria wants money for,” one well-placed Labor source said, explaining the prime minister’s decision-making process.
“There are holes in the ground at the moment and so we are of the view that this thing should be funded even if a group of people believe Labor is a fiasco. Jacinta [Allan] “He is loyal to the SRL and loyal to the Albo Labor governments, so he will be funded.”
Albanese made a surprise announcement in November that his government would contribute more to the rail cycle in the budget. He said the Commonwealth had received further information from the Allan government since Infrastructure Australia’s assessment, but this had not been made public.
King’s failure to attend a press conference with Allan and Albanese at the time raised eyebrows among Labor MPs.
King told this outlet that SRL “is a city-shaping project and our investment to date reflects its importance in supporting Melbourne’s growth”, pointing to Infrastructure Australia’s recent recognition of the project.
A Victorian government spokesman said they were “very pleased with our discussions with the prime minister”.
The rail loop has been a controversial idea since its inception. Its supporters see it as a visionary project that would create density in middle-ring suburbs like Ringwood and Clayton and transform them into thriving centres.
Critics, including federal and state opposition, have described the project as a pre-election thought bubble in which Andrews squeezes money from underfunded and struggling schools and hospitals.
Early last year Infrastructure Australia described SRL’s benefits as “overrated”, said cost estimates were “low confidence” and spoke of “exit strategies”. In contrast, the independent infrastructure consultancy said in March this year that the SRL was a priority and should be funded.
An investment case has found that SRL East and a second metro line in Melbourne’s north could deliver a positive return on investment once delivered. The government has refused to conduct a separate business case into SRL East.
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Paul Sakkal is the Chief Political Correspondent. He has previously covered Victorian politics and won the Walkley award as well as the 2025 Press Gallery Journalist of the Year award. Contact him securely on Signal @paulsakkal.14.Connect with: X or email.
