The federal government has scrapped $1 billion funding for faster train services between Newcastle and Sydney as part of a national review of major infrastructure projects.
The federal and state governments committed a combined $1.5 billion last year towards track improvements between Wyong and Tuggerah as part of a suite of planned "faster rail" projects which would cut 35 minutes off the journey from Newcastle to Sydney.
The projects were designed to reduce the journey to two hours while the federal government worked on longer-term plans for a new high-speed rail route between the two cities.
The state government scrapped its $500 million commitment to the Wyong-Tuggerah project in the September budget, passing over responsibility for improving travel times to the new national High Speed Rail Authority.
The federal infrastructure department on Thursday published a list of projects which had been dumped, including the Wyong-Tuggerah track upgrade, after the independent review of works in the investment pipeline.
"The review process found that there are projects that do not demonstrate merit, lack any national strategic rationale and do not meet the Australian government's national investment priorities," the review report concluded.
"In many cases these projects are also at high risk of further cost pressures and/or delays."
The review preserved $500 million for "High Speed Rail Authority priorities". The government has previously committed $500 million to planning and corridor acquisition for high-speed rail between Newcastle and Sydney.
The review report, completed after negotiations between the federal and state governments, lists the $450 million Muswellbrook bypass with two other NSW projects in a section covering works which would "proceed through planning, with remaining funding reserved for construction".
The review said the federal government would spend $27 million on planning the bypass and "set aside" $242 million for construction.
Infrastructure Minister Catherine King told a media conference on Thursday that Muswellbrook bypass was among projects "undergoing a proper planning process that was not previously carried out".
"We are keeping money for the construction of those projects that is in the budget currently, but we need to plan these projects properly," she said.
"They include ... the Muswellbrook bypass, again, a very important project in the Hunter Valley, but that is going to need to be sequenced against the Singleton bypass, which is commencing shortly".
Hunter Business chief executive Bob Hawes said the Muswellbrook bypass construction funding now appeared to be "contingent upon further review".
A spokesperson for Hunter MP Dan Repacholi said the project's classification did not mean it had been delayed.
The $700 million Singleton bypass, for which the federal government has promised $560 million, is listed as part of a $764 million commitment for New England Highway "road corridor" improvements.
The Newcastle Herald understands the principal construction contractor for the Singleton project will be announced this month.
The $2.1 billion M1 motorway extension to Raymond Terrace and accompanying Hexham straight widening will proceed as planned.
Ms King launched the review this year after announcing the investment pipeline she inherited from the former Coalition government was unsustainable and coloured by political considerations.
Committee for the Hunter chief executive Alice Thompson said the loss of $1.5 billion in funding for faster train services to Sydney was further evidence governments lacked vision on the region's role in the state and national economy.
"It's hard to believe that improvements to Australia's busiest regional rail corridor, linking the nation's largest city with the biggest regional economy, does not hit nationally significant benchmarks," she said.
"With all governments focused on housing, if ever there was a project that could redistribute settlement, offer citizens more choice and deliver affordable housing at scale, it is this."
Ms Thompson said "once again" Hunter residents had been "left in the slow lane with governments walking away from commitments for faster rail".
"Continued cuts to the region do not communicate governments understand the capacity of the Hunter in driving productivity and industrial transformation or are focused on supporting coal regions through change.
"As a $65 billion economy in transition, we are looking to the NSW and Australian governments for a better vision on the Hunter's role in the state and national economy."
She said the NSW government's dumping of the project in September was a signal the federal government would follow suit.
"Why would they proceed if the state government who delivers the project don't support it?"
'Very disappointing'
Urban Development Institute of Australia regional manager Elizabeth York said the loss of the rail upgrade funding was "very disappointing".
"UDIA believes the Hunter can go to a million people a lot faster than the state government believes we can," she said.
"It's going to need infrastructure investment to get there.
"We need government to believe in the Hunter.
"You would think with so many ministers now in cabinet from the Hunter we'd be able to get better investment here."
Upper Hunter Nationals MP Dave Layzell said he "cautiously welcomed" the outcome of the infrastructure review but was keen to learn about the finer details.
"Key among my concerns is construction of the Muswellbrook bypass and whether it will deliver both the New England Highway and the Coal Road connection with the town," he said.
A handful of federally funded projects in the Upper Hunter survived the cull, including the Coulsons Creek Road, Clarence Town Road and Bucketts Way upgrades and the Clarence Town Bridge rebuild.
The Mandalong Road upgrade at Morisset, which has attracted a federal pledge of $56 million, also survived.
The infrastructure review found an estimated $32.8 billion in "known cost pressures" across all infrastructure investment pipeline projects and a high risk of "future, not-yet-quantified" cost pressures.
"Of these, there are an estimated $14.2 billion in known cost pressures on projects not yet under construction," the review report said.
The review said the 10-year pipeline of projects could not be delivered within its $120 billion allocation.
Mr Hawes said the results of the infrastructure review begged the question: "Are we simply moving straight to high speed rail?"
"Given the strategic importance of this link, we would anticipate this would still be a high priority," he said.
"A significant reduction in the scope of projects should hopefully see those on the list move through without delay.
"Ideally, we'll also receive some clarity from the state government to confirm all these projects are in frame, given this clarity at a federal level."
Ms King said it was "clear that the previous government deliberately set about announcing projects that did not have enough funding and they knew could not be delivered".
"It can only be described, frankly, as economic vandalism," she said.
Most of the projects on the review list are jointly funded with state governments.
The government announced on Tuesday that it would require the states to increase their share of future road project funding from 20 to 50 per cent.
