Taxpayers on hook for big bill as Commonwealth Games axed

Victorian taxpayers will still pay a multibillion-dollar Commonwealth Games bill to cover continued project work and compensation following the state government’s unexpected decision to scrap the event owing to cost blowouts.

Premier Daniel Andrews cancelled the Games on Tuesday, claiming the cost of the event had ballooned to between $6.2 billion and $7 billion, almost triple the initial $2.6 billion cost budgeted 15 months ago when Victoria successfully bid for the event.

Minister for Commonwealth Games Delivery Jacinta Allan, Minister for Commonwealth Games Legacy Harriet Shing, and Premier Daniel Andrews on Tuesday.Credit: James Ross

The government has confirmed it would still spend $2 billion on Games-related projects and support for regional areas, while the size of the compensation bill for breaking its contract remains unknown.

Commonwealth Games Australia boss Craig Phillips lashed the new cost estimates as “inflated” and “grossly exaggerated” and said the decision would affect Victoria’s international reputation as a host of major events.

The Age and The Sydney Morning Herald have confirmed with government and major events sources that consultancy firm Ernst & Young was commissioned to provide the estimates. EY and other consultants also estimated the smaller initial cost.

Commonwealth Games authorities, regional mayors, athletes, sporting leaders and opposition politicians condemned the cancellation, lack of transparency on costs and failure to consult.

Andrews said Tuesday’s announcement was a “very, very straightforward” decision. “I’ve made a lot of difficult decisions in this job – it’s a part of this job. This has not been one of them,” he said.

“We are not going to spend $6-7 billion running a 12-day sporting event.”

Andrews said unforeseeable cost overruns came from services, security, transport and temporary infrastructure and the government needed to make its decision before major contracts were inked.

Government sources not authorised to speak publicly were playing down the size of any potential taxpayer-funded bill for breaking the contract, while a team of government lawyers was on the ground in London negotiating an exit from the contract with Commonwealth Games organisers. The Victorian government has not revealed the exit clauses for the Games contract.

Legal advice provided to the Queensland Liberal National government in 2012 about the potential axing of the Gold Coast Games – six years before the event – said the state would be liable to pay for the cost of staging another Commonwealth Games in a different city. Queensland Labor – which later released the advice when in government in 2018 – estimated that cost at about $1 billion at that time.

Deputy Premier Jacinta Allan, the minister responsible for the Games, said $2 billion would be spent finishing some planned works and supporting regional communities affected by the announcement.

“Each and every one of the community sporting infrastructure projects that we had been in detailed planning, design and conversations with councils and local communities [for] ... each one of those sporting infrastructure facilities will be going ahead,” she said.

Phillips said the cancellation clause in the contract for regional Victoria would not be identical to the Gold Coast’s and declined to go into the specifics as negotiations continued in London.

However, he said the government had jeopardised Victoria’s standing as an international sporting capital and embarrassed itself on the world stage.

“I would be very careful if I was an international sporting body, coming and doing business in this state in the future,” Phillips said. “I don’t think I’ve had many days in my career that would rank with this one, in terms of the level of disappointment.”

Victoria’s budget is under severe pressure with an infrastructure and interest rate crunch sending net debt towards $171.4 billion by mid-2027, producing an annual interest bill of about $8 billion.

In a statement from London, the Commonwealth Sport Movement said the Victorian government repeatedly made decisions, such as including more sports, adding another regional hub and changing planned venues, that “added considerable expense” – against the advice of the organising bodies.

“These [projected blowouts] are attributed to price escalation primarily due to the unique regional delivery model that Victoria chose for these Games, and in particular relate to village and venue builds and transport infrastructure.”

There was no federal funding for the 2026 Games in the May budget, and Olympics powerbroker John Coates said Victoria’s model was destined to fail without Commonwealth assistance.

“Regional models don’t work,” the former Australian Olympic Committee boss said. “Firstly, you have the cost of building the venues in regional cities, some of which are dismantled and therefore provide no legacy for the region. Secondly, by virtue of their smaller size, the venues don’t yield revenue via gate takings.”

A senior source from within Commonwealth Games Australia said the government wanted 21 sports when the organisers recommended including just 12.

City of Greater Geelong Mayor Trent Sullivan on Tuesday.Credit: Eddie Jim

The state government then added Shepparton to the list of regional host centres and included golf as an event. Golf was not previously a member of the Commonwealth Federation nor a sport played at the Games.

The mayors of Ballarat, Geelong, Bendigo and Latrobe said they were blindsided by the announcement; Geelong mayor Trent Sullivan said it was disappointing given how much time they had put into getting ready for the Games.

The government told The Age and Herald it would release the business case it used for the $6 billion estimate once the negotiations for scrapping the contract are complete. Andrews did not say how much he expected to pay to axe the deal.

Former Queensland premier Campbell Newman – who was elected after Queensland Labor’s bid to stage the 2018 Commonwealth Games had been accepted – sought advice about cancelling the Games in 2012. He told The Age and Herald his government decided to proceed with the event to protect taxpayers and the reputation of the state.

“The process would have been to challenge the business case and viability, and we were determined to protect taxpayers and proceed economically and carefully,” he said.

The legal advice in Queensland, prepared by one of Queensland’s leading sports lawyers, John Mullins, and seen by The Age and Herald, said damages would have included payments to the Commonwealth Games Federation and the costs associated with hosting the event elsewhere.

“The aim of an order for damages is to put the innocent party (as far as money can do it) in the same position as it would have been in had the other party performed its obligations under the contract,” the advice states.

“I imagine those damages would be similar to the cost of hosting the Games on the Gold Coast. It may be that you could run the games more cheaply somewhere else, but the quantum of damages would still be massive.”

Commonwealth Games Australia chief executive Craig Phillips speaks to reporters in Melbourne.Credit: AAP

Andrews claimed the government spent weeks looking at other options, including fewer sports and fewer options, but that hosting the Games exclusively in Melbourne still would have cost upwards of $4 billion.

“I find that a little hard to believe,” Phillips said.

He said the government wilfully ignored months of recommendations to move some events to pre-existing stadiums in Melbourne to reduce the cost of building temporary facilities that would not have a lasting benefit for regional communities.

“The government didn’t want to hear it,” Phillips told journalists on Tuesday. “We were told very clearly by the Victorian government: ‘Not interested’.”

Phillips was sceptical that the 2026 Games would have cost $6.2 billion, a figure he described as a “gross exaggeration” that was more than 50 per cent higher than estimates provided to the organising committee just one month ago.

EY declined to comment on client matters when asked when it was engaged and provided its advice. The Age and Herald have requested the workings from the government.

Tuesday’s announcement was preceded by chaos. While ministers were in cabinet deliberations on Monday, the Andrews government at 5.30pm cancelled a press conference planned in Geelong for Tuesday.

The Commonwealth Sport Movement said it had eight hours’ notice. It was not until Melbourne woke up, at 6.30am on Tuesday, that Commonwealth Games Australia learned the new costing existed and that the Games would be cancelled. Phillips first officially heard from the government at 8am, in a phone call from Tim Ada, the secretary of the Department of Jobs, Skills, Industry and Regions.

Games staff were hauled into a team meeting on Tuesday morning. About 90 staff are expected to lose their jobs.

By 9.30am, Allan, who is also Commonwealth Games Delivery Minister, had returned from leave early to appear before journalists in the back gardens of state parliament alongside Andrews and Commonwealth Games Legacy Minister Harriet Shing.

Those ministries, for the Commonwealth Games delivery and Commonwealth Games legacy, will cease to exist.

“Yes, I have returned from my leave,” Allan said. “But this has been a decision that we’ve been working through in the recent days and weeks.”

The government will still spend $2 billion delivering legacy sporting infrastructure and 1300 social housing units for the regional centres that would have hosted sporting events.

Athletes, including Commonwealth Games gold medallist Sally Pearson, said the decision was heartbreaking for Australia’s athletes who had been anticipating a home event.

Opposition Leader John Pesutto accused the government of humiliating Victoria on the world stage.

“How is it that the budget papers can be signed off by anybody at $2.6 billion, with the premier out today saying that they could cost as much as $7 billion?”

Prime Minister Anthony Albanese declined to weigh into the debate on Tuesday. “That’s a decision made by the Victorian government,” he said. “Australia has a fine record of hosting events.”

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