North East Link’s Cost Inflates to $26 Billion as Massive Blowouts Sting

North East Link construction site is seen during a press conference in Melbourne, Australia, on June 6, 2022. (AAP Image/Diego Fedele)

Victorian taxpayers will need to foot an extra $10 billion (US$6.7 billion) in construction bills for the North East Link highway as the project suffers massive cost blowouts.

On Dec. 15, the Victorian Labor government announced that the cost of the North East Link project, a 10-kilometre-long connection between the Western Ring Road and the Eastern Freeway, would rise to $26 billion.

The new figure is $10 billion higher than the 2019 estimation of $16 billion and more than double the original cost of $10 billion when the project was introduced in 2016.

During a press conference, Victorian Premier Jacinta Allan said the cost blowouts were the result of changes to the project and rising construction costs due to supply chain issues and inflation caused by the pandemic and the war in Ukraine.

“The consequences of those global events has been additional investment, additional costs being added across a whole range of things and this project is no different,” she told reporters.

“The materials we need like asphalt, steel and concrete, the cost escalation for those products have gone up, also too, things like power we need to run the (tunnel boring machines).”

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According to a document provided by the statement government, rising supply costs accounted for $3.1 billion in extra construction costs, while tweaks to the project resulted in another $6.4 billion.

Compared to the original design, the current project has an additional two kilometres of tunnel, a rail extension, a busway, as well as various highway upgrades and adjustments.

The project is still under construction and expected to be completed by 2028.

Despite the huge cost blowouts, Victorian Transport Infrastructure Minister Danny Pearson said the state would be worse off without the project.

“The cost of not building this project is too great—we simply can’t do without it—and we’re investing more because we have expanded the project and we’re delivering it in a different economic environment,” he said in a statement.

Apart from the cost announcement, the Victorian government also revealed two contracts with a total value of $9.5 billion to upgrade the Eastern Freeway and the M80 Ring Road.

The North East Link cost blowout comes just a few months after it was reported that the West Gate Tunnel, another major infrastructure project in Victoria, would see its costs balloon to $10.8 billion from the initial estimation of $5.5 billion.

Opposition Says State Government Wasted Taxpayers’ Money

Opposition major projects spokesman David Southwick accused the Allan government of wasting taxpayers’ money.

“This Christmas, whilst your family is tightening its belt, Labor are doing the opposite,” he said in a social media post.

“Wasting your money, driving up your cost of living and our record debt, a burden to be felt for generations to come.”

Opposition Leader John Pesutto said the state Labor government lacked the ability to manage money and projects.

“This is so many billions over the budget. Many Victorians would forget how it started out there,” he told reporters.

“Victorians are all paying the price through higher taxes and poor services which are getting cut.”

Meanwhile, a state budget update released on Dec. 15 revealed that Victoria’s net debt would be 3.7 percent higher in the 2026-2027 financial year compared to the previous forecast of $171.4 billion.

The state government said the increased net debt was mainly due to infrastructure project blowouts.