The government department tasked with overseeing the 2026 Commonwealth Games warned the now Victorian premier, Jacinta Allan, four months before the event was cancelled that an extra $1.9bn would be required to host it in five regional cities.
Tim Ada, the secretary of the Department of Jobs, Skills, Industry and Regions, has told a state upper house inquiry into the event’s cancellation that the estimated budget for hosting the Commonwealth Games grew from $2.6bn in March 2022 to $4.5bn a year later.
He said before the government committed to hosting the games in April 2022, a business case was put together by Ernst & Young in March that estimated the event would cost $2.6bn.
Ada said the business case “largely relied on top-down estimates and benchmarking against known amounts from the 2018 Gold Coast Games”.
“It is clear now, with the benefit of hindsight, that the business case prepared in early 2022 did not reflect the true cost of delivering a sporting program spread across five cities, nor anticipate the significant cost escalation that’s been experienced in the construction sector,” he told the inquiry.
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Ada said that in early March 2023, his department briefed Allan, who was then the deputy premier and Commonwealth Games minister, on “revised budget requirements to deliver the Games”.
He said an updated budget estimate of $4.5bn was not approved and the department was asked to “further explore opportunities to reduce costs while still meeting the government’s commitment to host the Games in regional Victoria”.
From April to June, it worked to put together a new budget but Ada said it became clear there were several “fiscal risks” emerging as planning progressed, including increases in infrastructure delivery costs and displacement costs for the use of some major venues.
He said the department made another revised budget submission of $4.2bn in June and noted to the government the risks associated with the games.
The submission was considered by the government on 14 July and not approved.
Four days later, the government cancelled the event on 18 July, with Allan’s predecessor, the then premier Daniel Andrews, blaming cost estimates tripling to $7bn.
It went on to pay $380m in compensation to Commonwealth Games bodies for terminating their contract.
Ada said despite the cancellation making headlines across the globe, there has been little impact on Visit Victoria – the state’s entity responsible for tourism and major events.
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“Discussions have continued largely without interruption and the decision has had little impact on the level of interest for international rights holders,” he said.
Ada’s evidence is consistent with the organising committee’s submission to the inquiry, which also claims Allan was warned about the rising cost of running the event in the months before it was cancelled.
In its submission Victoria 2026 – headed by the chief executive, Jeroen Weimar, and chaired by the former Richmond Football Club president Peggy O’Neal – said it “became clear” that the $2.6bn budget was “insufficient to deliver the games”.
In February 2023, the organising committee had requested an additional $722m from the government. This was submitted to the office of the Commonwealth Games (OCG), which was within the Department of Jobs, Precincts and Regions.
O’Neal then wrote to Allan, who became premier last week, two months later.
In April the OCG also requested the committee “propose mitigations that could reduce the cost of delivering the games”.
Weimar and O’Neal are expected to front the inquiry on Monday afternoon.