Dodgy economics

• RCP8.5 scenario costs. The cost to the Melbourne Airport Corporation and its investors of the IPCC RCP8.5 emissions scenario — that the MDP claims to have modelled in its climate risks assessment (see MDP Part C14, Table 14.3 ) — is nowhere addressed in the MDP. Yet the airport as a whole, including any Third Runway, will become a stranded asset if atmospheric concentrations of CO2 are anywhere near the RCP8.5 scenario’s 900ppm by 2100 (1)

• Poor health outcomes costs. The MDP does not address the costs of poor health outcomes from increased noise, pollution and climate change, caused by the Third Runway

• The environmental costs of the operation of the Third Runway are not included in the MDP, making its investment costs to economic growth comparison nonsensical (2)

• Aviation fuel tax subsidy costs. The cost to tax payers of the aviation fuel tax subsidy for domestic flights is unaddressed by the MDP. Known as the “Concessional rate of excise levied on aviation gasoline and aviation turbine fuel” it amounts to around $1,000 million annually (3)

• The net cost to tourism of flights overseas enabled by the Third Runway is unaddressed by the MDP. In 2018-19, Australians spent $65 billion on trips overseas (4), while international visitors to Australia spent $44.6 billion. A net loss to the economy of $20 billion (5)

• Job losses costs. The cost of job losses consequent to increased automation of airport functions, such as ticketing and baggage handling, is unaddressed by the MDP

• “No significant negative economic impacts.” The MDPs economic impact assessment concludes that “There are no significant negative economic impacts” (see MDP Part D2 Economic Impact Assessment, D2.5.2), and “All of the M3R impacts can be considered as economic benefits.” (D2 Economic Impact Assessment, D2.8)

This conclusion flies in the face of other recent economic assessments of proposed airport expansions.

In Flying Low (6), a New Economics Foundation (NEF) report focussing on the proposed expansion of Heathrow, NEF dissected the economic modelling conducted by various statutory bodies in the lead-up to the decision. They showed that, even using the government’s own criteria for infrastructure appraisal, the proposed investment in Heathrow represents a poor deal for the UK as a whole. NEF calculations suggested that — applying the usual HM Treasury scores to the proposed North West Runway (NWR) — it would be judged ​‘low’ or even ​‘poor’ value for money and would not be recommended for approval.

• Job losses of a No Build scenario. The MDP overstates the job losses of a No Build scenario. All the people employed in a Build scenario would not become unemployed in a No Build scenario. The state economy would develop in different ways: budgets and investment may well be spent elsewhere, leading to employment and contributions to GDP in other areas of the economy.

The dodgy economics behind expanding our airports (7), a report by NEF in the UK, found that expanding UK airports won’t tackle unemployment or bring more money to the UK, despite what airport executives say.

• New jobs a Third Runway will create. The MDP overstates the number of jobs a Third Runway will create. Relating indirect, induced and catalytic jobs to overall employment is essentially double counting. These jobs arise in other sectors. If all industries made the same claims, the number of jobs created would exceed the total workforce.

Western Sydney Airport (WSA) was promoted as offering a ‘jobs bonanza’ to local communities, but the Jobs for the West (8)  report found the job forecasts were vastly exaggerated. The report compared WSA’s 8,700 new jobs claim with 1,600 generated at similar airports.

The MDP doesn’t model the construction and operation jobs generated by east coast high speed rail  (HSR) infrastructure.

• Other costs including the $15 billion for a Melbourne Airport Rail Link, and the cost of Third Runway-induced traffic congestion, estimated to be roughly $8 billion a year by 2030, could be avoided by building High Speed Rail up the east coast of Australia.

• The MDP Melbourne Airport passenger growth expectations can be questioned. How they have been derived is not explained. They are presented as just “expected”. The MDP does not include an independent projected passenger demand assessment. Flight departures will not be affected according to the MDP. Yet ongoing Covid-induced business flight demand reductions, Covid-induced international holiday flight wariness, and climate-induced flight cancellations (such as when tarmac temperatures more frequently exceed 40ºC and make the air too thin for take-off (9)) are not modelled.   

• Industry super fund sustainability commitments don’t align with funding more emissions. Aviation infrastructure investments by the industry super funds, with shares in Melbourne Airport through IFM Investors, will become increasingly insecure as prudential assessments (in line with the International Energy Agency directive to not fund new fossil fuel projects) reveal their at-risk status from global heating (1)