Finance battered over Ergas' NBN cost-benefit analysis

A Department of Finance and Deregulation representative has questioned the quality of a "cost-benefit analysis" submitted to the NBN Senate Select Committee by economist Henry Ergas.

Ergas and Alex Robson submitted an analysis [PDF] to the committee that concluded the costs of building the NBN exceeded its benefits "by somewhere between $14 billion and $20 billion in present value terms.

"It is inefficient to proceed with the project if its costs exceed $17 billion... this amount is well below current estimates of the costs the NBN will involve," the analysis stated.

The Government has previously been quoted saying the NBN will cost up to $43 billion to construct.

In hearings in Canberra today, the Department of Finance's asset management group general manager Simon Lewis told the NBN Committee he "wasn't sure" if anyone from the Department had reviewed the Ergas analysis.

"The question is whether it's any good because there's a huge amount of work involved [in putting a cost-benefit analysis together]," Lewis said.

The Department was grilled by Senator Ian Macdonald over the remark.

"It would be interesting to know whether he's [Ergas] is on the right track or not," Macdonald said.

"Here's a guy that's tried to do [a cost-benefit analysis]. If he's wrong, wouldn't it be useful to be able to say ‘You didn't put enough weight on that [particular factor]?'" Macdonald said.

Committee chair Senator Mary Jo Fisher asked that someone from the Department be tasked to review the Ergas submission and take Senator Macdonald's questions on notice.