Victorian public transport users have been hit with a secret “Suburban Rail Loop slug”, Victoria’s financial watchdog has revealed, amid warnings the controversial project is “more likely than not” to blow its original $34.5bn budget.
In a report released on Wednesday, the Victorian Auditor-General’s Office revealed commuters have unknowingly been paying the secret 1 per cent levy on all public transport fares across Victoria since January last year.
The levy – added on top of existing annual CPI fare increases – was never publicly disclosed by the government.
“The government and Transport Victoria did not acknowledge the levy in their public communications about the 2025 and 2026 annual fare increases,” the report said.
Sixty per cent of the revenue the government collects through the levy, estimated at $4.8bn through to 2062, will be used to fund SRL East, making it the project’s largest source of value capture revenue, according to VAGO.
In its report, VAGO concluded that the project’s overall funding strategy was “not transparent”.
It warned SRL East – to which the federal government has committed $6bn – was “more likely than not” to exceed its original cost estimate of up to $34.5bn and was unlikely to meet the government’s target to start running trains by 2035.
The report was handed down a day after Premier Ben Carroll confirmed his government would proceed with SRL East – which is an underground rail line between Cheltenham and Box Hill in Melbourne’s east – at an estimated cost of $32.3bn after it shaved $2bn off the price.
VAGO said its analysis, as of the end of 2025, suggested a final cost of more than $36bn, but added that there were additional costs required to achieve the government’s claimed benefits for the project and its value capture revenue target that may exceed $2.5bn.
The state government is relying on value capture mechanisms to fund one-third of SRL East’s cost. It is banking on federal funding to cover another third, and state funding to cover the rest.
VAGO said housing and employment benefits for the project were dependent on private investors, who were already facing “challenging market conditions to buy and develop property”.
“This puts both the project’s expected benefits and revenue from new value capture measures at risk,” it said.
The report said the government had approved $23.3bn from the state budget to fund the project, but only publicly announced $11.8bn.
It said $6bn had been committed by the federal government, leaving a $5.5bn gap in the project’s funding. Victoria did not have enough funding approved to sign the contract for the second stations package, it added.
VAGO said the state government’s messaging that SRL East “is actually a housing project”, and the suggestion it warrants additional federal investment on that basis, was “not transparent” because the project included no approved scope or funding for housing construction.
Opposition Leader Jess Wilson said the secret public transport levy was “a scandal of the highest order” and “the final nail in the coffin” for the government.
“What other secret taxes are Labor levying on Victorians without telling them?” she said.
Mr Carroll was in Sydney on Wednesday for a national cabinet meeting and presented NSW Premier Chris Minns with a box of Melbourne’s renowned Lune croissants, despite the Victorian bakery having a Sydney outlet.
In a written statement following the release of VAGO’s report, Mr Carroll said his government was “building the public transport Victorians need now and into the future, and we’re delivering it for $2bn less”.
He said: “I lead a government that levels with Victorians. When costs change, we’ll tell you. When we find savings, we’ll bank them.
“I’m a premier taking the state in a new direction and Victorians deserve to know what their money is buying. Under my leadership, they will.”
Treasurer Colin Brooks earlier denied the public transport levy was contributing directly to the SRL and said that, contrary to VAGO’s report, it did not form part of the project’s value capture framework. But he admitted the government “could have been more transparent” about how the money was being invested.
About $13.2bn worth of contracts for the project had been signed as of June, VAGO said.
The state opposition has pledged to pause and review the project if it wins the November state election.
