The City & Southwest section is the second stage of the Sydney Metro system, following the Northwest section, which was opened in May 2019. The main feature of the system is high-frequency, driverless trains operating on mostly underground lines.
The Sydney Metro City & Southwest project will extend the Northwest line by 30km, from Chatswood in the north to Bankstown in the south-west, via the CBD. The project involves twin tunnels under Sydney Harbour, from Chatswood to Sydenham in the inner west.
Cost estimates for the project crept up in the early years of planning, before an overrun of $3 billion was announced because construction was proving more expensive than expected. An internal review has also suggested that costs could increase by a further $1 billion.
Media reporting in 2015 had early cost estimates for the project of up to $11 billion.97 A year later, the expected cost was between $11.5 billion and $12.5 billion.98
In February this year the NSW Government announced an overrun of $3 billion on the project, with the current estimate now sitting at $15.5 billion. NSW Transport Minister Andrew Constance attributed the overrun to higher costs because of higher demand in the market:99
I am sorry it happened this way but it is very much market forces at play in terms of the build. We are not denying there hasn't been significant cost pressures on the project... If you go back five years ago, I think it's fair to say that not even Treasury could predict the escalation increases in the infrastructure market. And it's not just in Sydney.
The Minister's comments reflect the story being told in Figure 6.3 on page 43. Transport construction costs were flat between late 2013 and late 2016, but grew strongly thereafter.
Regardless of the market movements, however, there are questions over the early cost estimates. Former WestConnex and Transfield chair Tony Shepherd has suggested the $12.5 billion figure was 'probably an early estimate before the facts were in'.100 More generally, he also recommended governments be 'very careful on making the point that estimates in the early days are just preliminary estimates because no one has done the work yet'.
The Sydney Metro City & Southwest project may face further overruns. An internal budget review is reported to have forecasted a final cost of $16.8 billion - $1.3 billion higher than the current $15.5 billion estimate.101
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97. Beech (2015); and Kembrey (2015)
98. NSW Government (2016).
99. O'Sullivan (2020a).
100. Rabe and O'Sullivan (2020).
101. O'Sullivan (2020b).