NSW rail benefits overstated by flawed analysis – Australian Financial Review

In the article “Rail Freight Analysis Under Fire in NSW” (AFR, January 17) your correspondent Jenny Wiggins quoted my audit of the cost-benefit analysis (CBA) prepared by Deloitte to justify expansion of the Northern Sydney Freight Corridor.

There is a need to set the record straight regarding the attempts by Transport for NSW to prop up Deloitte’s findings. It claimed the Deloitte analysis was peer reviewed and was prepared “in accordance with relevant guidelines”.

But, whether peer reviewed or not, this analysis was not prepared in accordance with relevant guidelines. For example, the NSW Treasury guidelines for economic appraisal do not support Deloitte’s inflation of the benefits by adding capital amounts to them, nor it’s relabelling of costs as benefits.

This manipulation of the CBA process enabled Transport for NSW to justify the rail upgrade.

Benefits are properly defined as the differential cost savings achieved by using rail instead of road.

By correct use of the NSW Treasury guidelines, my audit showed that the real benefits were only about one-fifth those obtained by Deloitte, which incidentally was aware of the same definition of benefits but did not use it.

This approach is not unlike the use of traffic forecasts generated by “work back” from the returns to equity investors in order to promote the failed BrisConnections Airport Link.

It does not augur well for the economic future of Australia if government departments and the private sector use flawed means to promote costly infrastructure projects.

John L Goldberg
Beecroft, NSW