Kevin Rudd’s high speed rail, parental leave cost comparison is unsound (Video)

Kevin Rudd’s high speed rail, parental leave cost comparison is unsound :Prime Minister Kevin Rudd says building a high speed rail project from Brisbane to Melbourne would cost less than the Coalition’s paid parental leave scheme.

“If we were to build this entire 1,750km high speed rail project from Brisbane to Melbourne by 2035, it would cost less than Mr Abbott’s unaffordable, unfair paid parental leave scheme for the same period of time,” Mr Rudd said at a press conference on August 26.

He made the comment after promising to fund further planning for a fast rail network and suggesting that a Melbourne-Sydney route could be built by 2035.

High speed rail background

The Government first announced a high speed rail study in August 2010.

An initial report was released on August 4, 2011.

A second report was released on April 11, 2013, outlining a preferred route of 1,748 kilometres to be built in stages between 2027 and 2058.

The Government then set up a High Speed Rail Advisory Group which released its own report on August 26, 2013.
Estimating the cost

ABC Fact Check has assessed Mr Rudd’s comments by reference to the proposed network outlined in the April report.

The report says the “optimal staging” would be to begin construction of the Sydney-Canberra line in 2027 and to open the last section, the Gold Coast-Newcastle line, in 2058.

The estimated capital cost, excluding the cost of train sets and any operational costs, is $114 billion in 2012 dollars.

The report also sets out an “accelerated timetable” that begins in 2022 – “the earliest possible start” – and ends in 2053.

This timetable allows for completion of the Melbourne-Sydney link by 2035.

The report notes the accelerated staging “would likely incur additional cost and risk”.

The report does not discuss completion of the whole network by 2035.

Dr Rico Merkert from the Institute of Transport and Logistics Studies at the University of Sydney has told ABC Fact Check high speed rail projects usually cost more than planned.

He says this is particularly so “in cases like this where a large amount of tunnelling is required”.

Dr Chris Hale, a lecturer in the Department of Infrastructure Engineering at the University of Melbourne, has a different view.

“The accuracy of cost estimation for high speed rail projects has improved dramatically over the last 10 years and most projects now come in very close to their original cost estimates,” he said.

ABC Fact Check asked the ALP campaign office for the basis for Mr Rudd’s comments about the costs of the Government’s high speed rail proposal.

An ALP spokesperson said he was using the $114 billion cost estimate from the April report.
The Coalition’s paid parental leave scheme

Opposition Leader Tony Abbott has pledged to pay new parents six months of their actual annual salary, with the payment capped at $75,000.

The Coalition has not released an estimate of the annual cost of its scheme, which it plans to start on July 1, 2015.

On August 28, it announced the total gross cost of the scheme is $9.8 billion during the forward estimates period, which ends in 2016-17. It gave no annual breakdown.

ABC Fact Check asked the ALP campaign office for the basis of the estimate that Mr Rudd used.

A spokesman said he used the sum of $5.5 billion per year “based on multiple media reports of the yearly cost” to reach a total of $115.5 billion (in 2013 dollars).

The $115.5 billion is based on a 21-year period, which ABC Fact Check has taken as 1 July 2015 to 30 June 2036. Mr Rudd’s statement refers to 2035. If the timeframe July 1, 2015 to June 30, 2035 is used, the total is $110 billion.

The Coalition does not dispute that the $5.5 billion figure represents an estimate of the annual gross cost beyond the forward estimates.

However, a Coalition spokesman told ABC Fact Check the relevant cost was the net cost, which deducts the existing Labor minimum wage scheme and the existing scheme for public servants.

It also takes into account the estimated increase in tax revenue from people receiving the benefit, and the estimated reduction in family tax benefits.

Adjusting the annual gross figure of $5.5 billion for these measures results in a net figure of around $2 billion a year.

On this basis, the total expenditure to 2035 would be $40 billion in 2013 dollars.

ABC Fact Check considers using the net figure is better than using the gross figure, as the new scheme will be accompanied by changes to existing schemes and benefits.

All of these long-term estimates are speculative. The cost of the Coalition’s paid parental leave scheme is unlikely to remain the same for the next 20 years, given demographic and economic changes.

However, neither the Coalition nor the ALP has released cost projections for the scheme over a 20-year period.
The verdict

Mr Rudd’s conclusion is unsound.

At best, assuming that the real cost of the paid parental leave scheme remains the same into the future and that the whole rail network could be built 23 years early (by 30 June 2035) for no additional cost, the two schemes would cost much the same.

But that ignores the fact that the existing parental leave schemes will be abolished if the new scheme is adopted.

Using the net cost of the new scheme, building the rail network would be more expensive than paid parental leave.

However, given the uncertainties surrounding the cost of both schemes, it is premature to compare them at this time.

Kevin Rudd's high speed rail, parental leave cost comparison is unsoundSource :

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