Coalition says SRL pause won't stop tunnelling as $1b cost warning emerges

Construction of the $34.5 billion underground rail line will continue if the Coalition wins the state election, an opposition spokesperson said, despite industry expectations that the policy meant a halt to work.

The Suburban Rail Loop was promised by former premier Daniel Andrews before the 2018 election and has been a key issue in successive campaigns. Tunnel boring is under way on the SRL East line from Cheltenham to Box Hill, with three machines having dug 138 metres since September.

A briefing note provided to the state government in recent months estimated that anything other than a minor pause would cost $1 billion to $1.5 billion, according to five government sources who spoke anonymously to detail confidential documents. A six-month delay in SRL East construction after tunnel boring began would cost between $2.2 billion and $2.7 billion, the note said.

The Coalition spokesperson rejected the figures, saying the independent Parliamentary Budget Office had assessed the party's policy and found it would have no impact on the budget position. "The Coalition position to pause and review the SRL does not mean workers are sent home or tunnel boring stops," the spokesperson said. "Anything that purports to cost our policy on this basis is a lie and misleading."

The sources conceded the advice was partly informed by people with an interest in keeping the project going, such as Suburban Rail Loop Authority staff, but said many issues were valid. They noted that best-practice guidelines mean tunnel boring machines should not be paused for extended periods under housing, requiring them to reach a suitable location before stopping. Contractors are also entitled to compensation during a suspension, confirmed by the Victorian Auditor-General's Office, which stated the state must pay reimbursable costs even if it suspends the contract. Exceptions apply if the suspension is because of an issue created by the contractor or if the authority determines the project is late or over budget.

Opposition Leader Jess Wilson has repeatedly cast doubt on the total cost estimate, citing blowouts on other projects and high construction inflation. "The only responsible thing to do for an incoming government that has no visibility of the contracts that have been signed is to pause this project to make sure we do a review that is swift," she said at The Age's Melbourne Assembly. "Then we make a decision in the best interest of Victorians, taking into account the contractual arrangements, the financing arrangements, and of course, the construction at that point in time."

The Coalition spokesperson said its commitment to pause had no technical or budgetary differences from the government’s decision not to award further SRL contracts until its review was complete. The Labor government has announced $1 billion in savings and committed to a technical review to find another $1 billion.

The state's economic and fiscal update, to be released on Friday, will show operating surpluses of $300 million in 2026-27 and 2027-28, down from forecasts in the May budget, which projected surpluses starting at $1 billion and rising to $2 billion by 2030. Net debt is now expected to reach $197 billion by 2030, $2.3 billion lower than previously forecast. The government will say the lower debt and continued surpluses show its efforts to reduce spending have been working.