The budget for Victoria’s largest road project – the North East Link – has blown out by more than $10bn and is now estimated to cost $26.1bn.
The premier, Jacinta Allan, on Friday said the estimated cost of the project, which will connect the M80 Ring Road at Greensborough with the Eastern Freeway at Bulleen, will be far greater than the $15.8bn outlined in its business case.
“As we have added scope to the project, we’ve needed to invest more,” Allan said.
According to a revised budget document provided to Guardian Australia, changes to the project’s design and scope will add $13.43bn to the total cost. This includes $9.5bn worth of upgrades to the M80 and Eastern Freeway, $2bn for an additional 2km of underground tunnel, $750m for a dedicated bus lane and $600m on improved noise mitigation.
About $3.88bn worth of “additional cost pressures” had also been identified according to the document, including $3.1bn for the increased cost of construction supplies.
Allan said there had also been “unforeseen global circumstances” since the project’s business case in 2017, including the Covid-19 pandemic and the war in Ukraine.
“As we’ve seen around the world and anyone who runs a business or their household budget knows this as well – the consequences of those global events have seen additional costs being added [to] a whole range of things,” she said.
“This project is no different. The materials we need like asphalt, steel and concrete, the cost escalation for those products has gone up. Also things like the power we need to run the TBS [tunnel boring system] requires additional investment because of those global economic circumstances.”
She said there was “great frustration and disappointment” about the increased costs but there was no plans to pause the project.
“We had a choice about whether we don’t proceed with getting this project right and leaving it for another government in 60 years’ time, or we do this project once and do it right,” Allan said.
“That’s the choice that we’ve made.”
Allan on Friday also announced the signing of contracts for the Eastern Freeway and M80 upgrades, which were valued at $5.7bn and $3.8bn, respectively.
In a statement, she said the “two biggest freeway overhauls in Victoria’s history are expected to cause significant disruption over coming years”.
It comes as Victoria’s net debt prediction jumped by more than $6bn in six months, and was now expected to reach $177.8bn by 2027, according to a budget update released Friday.
The government attributes that to infrastructure investment, particularly extra funding for the North East Link.
Net debt is expected to reach $135.5bn by next June, before climbing to $177.8bn in 2027 – is $6.4bn higher than the estimate in the May budget, representing 25.1% of gross state product.
The North East Link was first proposed by Labor in 2008. At the time, it was suggested it could be built for $6bn.
Former premier Daniel Andrews recommitted to the project in 2016 and said it would cost $10bn, but this was revised to $15.8bn after the release of the detailed plans and a business case.
The road will stretch 10km from Bulleen to Greensborough and includes 6.5km of tunnels, and will widen the Eastern Freeway.
The government said it is on track to open in 2028.
The opposition’s major projects spokesperson, David Southwick, said “things have gone from bad to worse” under Allan’s leadership.
“The scale of this latest blowout should shock all Victorians,” he said.
“This project has blown out by more than $1bn a month since a cost update was provided in the May budget … [it] demonstrates that Labor’s major project budget figures can no longer be believed.”
– with Australian Associated Press
