Andrews declares Games furore finished with $380 million payout

The penalty for scrapping the 2026 Commonwealth Games will be $380 million “and not a dollar more”, Premier Daniel Andrews has revealed, saying a settlement with organisers gags all parties from discussing the deal.

The state government released a document showing how badly wrong it got the initial Games budget, with the costs of the athletes village alone blowing out by fourfold to more than $1 billion.

The document also revealed $2 billion in “additional cost pressures” with few details, that the state government linked to the war in Ukraine and a “hyper-escalation” of expenses.

The agreement was the best outcome Victoria could get, Andrews said on Saturday, as it would avoid a lengthy court battle including a costly “lawyers picnic”.

The payout will be funded from the existing Games budget.

“Who knows what the ultimate number would have been?” he said. “Who knows who wins and who loses in those sorts of matters?”

Last month Andrews announced the cancellation of the 2026 event – which was to be held in six regional centres – claiming the initial budget of $2.6 billion had blown out to “at least $6 billion” and potentially “as high as $7 billion”.

The government announced in a statement early on Saturday morning that it had reached a confidential settlement on all its disputes with Commonwealth Games organisers.

Negotiators flew to London last month to hammer out a deal, but an agreement was only struck late on Friday night.

“I can confirm a final settlement of $380 million and not a dollar more,” Andrews said.

“No court action, the matter is closed out and finalised.”

As part of the announcement, the Andrews government released its original business case and updated costings that showed the extent of the Commonwealth Games budget shortfall.

The total cost of the Games was initially expected to be about $3 billion at most, however that figure has since leapt to $6.865 billion.

Victorian Premier Daniel Andrews speaks to the media on Saturday.Credit: Chrios Hopkins

The cost of the athletes villages rose from a “worst case” scenario of $250 million in the original business case written in January 2022 to $1.023 billion last month.

Transport costs increased from $110 million to $306 million over the same period, while police and security went from $201 million to $492 million.

The biggest hole in the budget was an unspecified extra $2 billion that was needed to meet “additional cost pressures” – which were not part of the original cost estimates .

These include “hyper-escalation driven by compressed timelines”, inflation, issues with regional supply chains, shortfalls in accommodation, and the cost of relocating major sporting codes.

Treasurer Tim Pallas said that the “world has changed quite considerably” after the initial contract was signed.

“Firstly, a couple of weeks later, Russia invaded Ukraine, and we saw hyperinflation largely around energy and commodity markets affect the world,” he said.

When asked about other costs, such as staff redundancies, Andrews said these were still being finalised but said they would all be contained within the original $2.6 billion budgeted for the Games.

“There will not be a need for us to add any further money to the original budget,” he said.

“We will have to wait and see how far inside that budget we finish up.”

The Andrews government knew there were risks in delivering the event on budget, as the original business case raised concerns about the lack of time for due diligence before signing the initial agreement to host the Games.

Ballarat’s Mars Stadium was to be refurbished for the Commonwealth Games.Credit: Eddie Jim

To offset this risk, the document said the government should ensure the hosting deal had flexibility for the government to alter its plans to deliver the Games.

Documents released on Saturday sought to push some of the blame for the athletes villages blowout on to the Commonwealth Games organisers by saying there was limited land that met the “strict conditions” placed on their locations.

This would have required a high proportion of temporary demountable structures, the document said, which significantly reduced any potential private sector interest.

Premier Daniel Andrews and initial host venues for the 2026 Commonwealth Games.Credit: The Age

The Age revealed in July that a previously unpublished bid document had aimed to limit the cost of the Games by keeping events in three regional cities – Geelong, Ballarat and Bendigo – and to mostly use existing facilities.

But by 2023, the event had been spread to six cities – Shepparton, Morwell and Traralgon were added as venue cities – and announcements were made for a host of new projects and temporary venues.

Opposition Leader John Pesutto on Saturday said the true cost of the cancellation would be significantly higher than what was announced.

“Victorians will pay at least $380 million for an event that will never happen in a debacle that has damaged Victoria’s reputation internationally,” he said.

The business case also confirms that the Andrews government secured an exclusivity deal that shut out competitors from bidding for the Games.

On July 18, when announcing the cancellation, Andrews said the Commonwealth Games “needed a host city to step in at the last minute”.

When the government first announced the cancellation, Commonwealth Games Australia chief executive Craig Phillips disputed the government’s estimates of a total cost of $6 billion to $7 billion.

The state government has promised to spend $2 billion on a support package for the regional communities affected by the cancellation.

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