How Much Road Can a Single NBN Build?

So Tony Abbott wants to take the money that will be allocated to the National Broadband Network (NBN) over the next 10 years – ($35b) – and “build some roads”?

Interesting. Possibly – (and almost certainly) – quite useful.

Shall we have a look at just how much road a single NBN-sized chunk of funding might actually build?

Well, just how much is actually quite difficult to answer.

Complex solutions where federal, state, and local government contributions are often part of funding a single road project make it almost impossible to scrape all the figures into a truly accurate amount.

So what to do?

Well, since the NBN will be federally funded, lets see if we can find out how much federal money is put into road funding each year.

Table number five in this report gives us a figure of $13.9b for the financial year 2007-2008. Quite a lot of coin, but we now have a base line to work from.

Next, I figure we need to ask how much money does it take to build/rebuild a kilometre of road?

There is undoubtedly a lot of variation around, so lets look at few different road projects, and see if we can come up with an average.

First, how about the Geelong Ring Road, a $1.3b project to build a brand new 26km long freeway, where no previous road existed? That is about $50m per kilometre.

Next up, we have the Breakwater Road Project, also in the Geelong area, which sees the realignment of 1.3km of a major arterial road, which includes a significant bridge over the Barwon River, costing $63m. For this project, we see $48.4m per kilometre.

For the upgrade of an existing highway, we will take a look at the recently contentious Oxley Highway Upgrade near Port Macquarie in New South Wales. A 6km stretch is being upgraded for $158m, or about $23.6m per kilometre.

Finally, for the upgrade of a major freeway, namely the M80 in Melbourne. Approximately 38km of freeway is being heavily upgraded for $2.25b. This tips the scales at $59.2m per kilometre.

Across these quite different road projects, the average cost per kilometre – (71.3km, costing $3.77b) – comes to $52.88m per kilometre of roadway built or upgraded.

So the funds for a single NBN – ($35b) – redirected at road funding might see around 661km of road built or upgraded.

Sounds like a lot.

In fact, it is a lot of road – there is no doubt about that.

But…

…the NBN is spread over approximately 10 years, and while the spread of funding will not be the same across each year of the project, only about $3.5b per year on average goes towards it.

That is just 66.1km of road.

Now, I’m not going to say that 66.1km of road isn’t significant, but suddenly it doesn’t sound quite so impressive.

Assuming roughly the same amount of money is allocated by the federal government to road funding over 10 years – (this is not the case, the table clearly indicates the amount is steadily growing in real terms) – across the life of the NBN build, $139b will be allocated to road funding.

That’s 2,629 kilometres of road, versus the 661 kilometres that redirected NBN funds might be able to deliver.

Now, one can argue that 661 extra kilometres of new or upgraded roads is a good thing – and it is.

However, in conclusion, ask yourself how much of the $139b likely to be allocated – (at least) – to road funding in the next 10 years will the government recoup?

How many dollars will directly return to government coffers?

Almost none. There will certainly be significant economic benefits from having all that new and upgraded road out there, but having the NBN out there will deliver great benefit to the economy also.

The difference is, the money spent on it will return at the rate of at least $24 per subscriber, per month. At some point, all the money will come back.

How long that takes is a point of some debate – but remember, the road funding isn’t coming back at all.

Suddenly, spending $35b on a revolutionary telecommunications solution for Australia that will see us through for around 50 years, doesn’t seem like such a bad idea.

Does it?

[CAVEAT: Obviously, there will be some element of error in the cost per kilometre calculations in this post – obviously every single road project is different, and will include many different factors affecting cost. Including EVERY road project as part of these calculations is difficult. The comparison however is definitely an interesting one.]

  • Anonymous

    With the NBN people can work effectively from HOME, therefor we will need LESS roads, simple logic really!.

    • Another perfect valid position. One of the links to another of my posts makes a point to that end.