Project blowout on North East Link to cost $26 billion

The cost of the North East Link in Melbourne is predicted to cost $26.1 billion, more than double the original estimate, driven by the cost of materials, inflation and energy prices.

The major road project in Melbourne's east was originally tipped to cost $10 billion when it was unveiled in 2016 and priced at $15.8 billion in the 2017 business case.

Construction is already underway on the 10km long connection between the Western Ring Road and the Eastern Freeway, which is set to be as wide as 20 lanes in some sections and includes 6.5km of tunnels.

Victorian Premier Jacinta Allan attributed the $10 billion blowout to several issues including changes to the project, rising construction costs, supply chain issues and the inflationary impact of global events like the pandemic and 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," Ms Allan told reporters on Friday.

"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)."

Victorian Premier Jacinta Allan
Premier Jacinta Allan says the cost of materials like asphalt, steel and concrete has escalated.

Treasurer Tim Pallas said about 60 per cent of the additional costs came from the "deliberate decisions" by government on design changes to enhance the project.

"That was about making sure that we weren't running roads through communities where we could avoid it,'' he said on Friday.

"We heard people wanted better noise (amendments) and that all comes at a cost, but it's also an investment for the future."

A Major Road Projects Victoria cost explainer provided by the government showed the rising cost of supplies totalled $3.1 billion.

Tweaks to the project cost $6.4 billion, including adding an extra two kilometres of tunnel, freeway upgrades, design adjustments, a rail extension and a busway.

The road is to open in 2028 and Ms Allan said congestion around Melbourne would only get worse if the road is not built.

Opposition major projects spokesman David Southwick said the price jump cast into doubt other costings in the state's budget and accused Ms Allan of mismanagement.

"How could we believe any major project that this government touches isn't going to blow out like this one," he told reporters on Friday.

"This is a legacy that no one wants, no one signed up for, and we're all paying the price."

Opposition leader John Pesutto said the government needed to be transparent with the community on how exposed Victorians are to project blowouts.

It's the latest in a string of infrastructure project blowouts since Labor came to power in the state in 2014, including the West Gate Tunnel which is $4.1 billion over budget.

Friday's state budget update tipped Victoria's net debt to reach $177.8 billion by mid-2027, some $6.4 billion higher than predicted six months and attributed to rising infrastructure investment.

License this article

What is AAPNews?

For the first time, Australian Associated Press is delivering news straight to the consumer.

No ads. No spin. News straight-up.

Not only do you get to enjoy high-quality news delivered straight to your desktop or device, you do so in the knowledge you are supporting media diversity in Australia.

AAP Is Australia’s only independent newswire service, free from political and commercial influence, producing fact-based public interest journalism across a range of topics including politics, courts, sport, finance and entertainment.

What is AAPNews?
The Morning Wire

Wake up to AAPNews’ morning news bulletin delivered straight to your inbox or mobile device, bringing you up to speed with all that has happened overnight at home and abroad, as well as setting you up what the day has in store.

AAPNews Morning Wire
AAPNews Breaking News
Breaking News

Be the first to know when major breaking news happens.

Notifications will be sent to your device whenever a big story breaks, ensuring you are never in the dark when the talking points happen.

Focused Content

Enjoy the best of AAP’s specialised Topics in Focus. AAP has reporters dedicated to bringing you hard news and feature content across a range of specialised topics including Environment, Agriculture, Future Economies, Arts and Refugee Issues.

AAPNews Focussed Content
Subscription Plans

Choose the plan that best fits your needs. AAPNews offers two basic subscriptions, all billed monthly.

Once you sign up, you will have seven days to test out the service before being billed.

AAPNews Full Access Plan
Full Access
  • Enjoy all that AAPNews has to offer
  • Access to breaking news notifications and bulletins
  • Includes access to all AAPNews’ specialised topics
Join Now
AAPNews Student Access Plan
Student Access
  • Gain access via a verified student email account
  • Enjoy all the benefits of the ‘Full Access’ plan at a reduced rate
  • Subscription renews each month
Join Now
AAPNews Annual Access Plan
Annual Access
  • All the benefits of the 'Full Access' subscription at a discounted rate
  • Subscription automatically renews after 12 months
Join Now

AAPNews also offers enterprise deals for businesses so you can provide an AAPNews account for your team, organisation or customers. Click here to contact AAP to sign-up your business today.

Download the app
Download AAPNews on the App StoreDownload AAPNews on the Google Play Store