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The North East Link will cost taxpayers $10 billion more than previously predicted, with the total price of the project blowing out to $26.1 billion.
Premier Jacinta Allan on Friday revealed a massive increase in the cost of the tollway and road tunnel, linking the Eastern Freeway to the M80 Ring Road through Bulleen, as it signed two remaining contracts on the project.
The North East Link interchange to be built in Bulleen.Credit: North East Link Authority
When first pitched, the North East Link was expected to cost $10 billion, but this was revised to $15.8 billion in 2019 after more detailed planning and design decisions were made.
When the contract for the primary tunnelling work was awarded at $11 billion in 2021, it was expected the remaining agreements would take the project to between $18 billion and $20 billion with the blame put on labour and rising material prices.
But Friday’s $26 billion figure was beyond expectations aired publicly, even as the Department of Transport had internally rated the North East Link as a high risk of blowing out by more than 20 per cent.
The Allan government has previously justified the higher costs, particularly for the primary contract, because of the added scope including a longer tunnel.
The contracts awarded on Friday were for the sections of the tollway that connect to the Eastern Freeway, including the addition of new lanes and noise walls, and for the link to the M80 Ring Rd at Greensborough. They are now valued at $5.7 billion and $3.8 billion respectively.
In a statement, the government said the new costs reflected inflation and a “massive escalation” in construction costs reported in Australia and internationally. They said the contracts formed part of the “two biggest freeway overhauls” in the state’s history.
Allan said global economic circumstances had changed significantly since the project’s business case in 2017, pointing to the pandemic and the war in Ukraine.
“The consequences of those global events are [that] we’ve seen additional investment, additional costs being added across a whole range of things and this project is no different,” she said.
Victorian Premier Jacinta Allan revealed the project has blown out to $26.1 billion. Credit: Joe Armao
“The materials we need like asphalt and steel and concrete, the cost escalation for those products have gone up.
“Also too, things like the power we need to run the tunnel boring machine requires additional investment because of those global economic circumstances, and so we have a bigger project and those global economic circumstances means that we’ve had to invest more in the project.”
Major Road Projects Victoria chief executive Duncan Elliott said the project had been expanded in line with expert advice and feedback from the local community.
Victoria’s largest road project will stretch 10 kilometres from Bulleen to Greensborough when it opens in 2028 and includes 6.5 kilometres of tunnels. It will widen the Eastern Freeway by up to 20 lanes.
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