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Commonwealth Games authorities and sports agencies remain locked in negotiations with the Victorian government in an attempt to maximise taxpayer-funded compensation they will receive after the state’s decision to break its commitment to host the 2026 event.
Premier Daniel Andrews and his spokespeople repeatedly refused to discuss the negotiations on Wednesday, including the size of any potential compensation deal. The premier also would not say who was responsible for rejecting Games authorities’ suggestion to move the event from the four regional hubs to a centralised event in Melbourne.
A senior source with knowledge of the Commonwealth Games Federation’s commercial negotiations, but not authorised to speak publicly, told The Age the CGF was pursuing “hundreds of millions” in compensation. Commonwealth Games Australia has flagged possible action over the loss of its $26 million contract and German-based sporting events agency SportFive is also expected to seek compensation.
The Andrews government has been juggling worsening net debt, tipped to reach $171 billion by 2026-27, in part because of borrowings for over-budget major infrastructure projects.
Global ratings agency Moody’s said cancelling the Games would not improve Victoria’s budget position, given it was still committed to spending the $2 billion budgeted the event on regional housing, sports facilities and tourism.
Moody’s analyst John Manning said that spending would not necessarily deliver the same economic benefits that would have been generated by the Games.
Deputy Premier Jacinta Allan held the Commonwealth Games delivery portfolio.Credit: Joe Armao
“What appears will be lost is a lot of the preparatory work for hosting the Games, which will be labour intensive, and tourism,” Manning said.
“The spending on social housing is going to provide an underlying benefit going forward. The benefits of the stadiums in regional Victoria, it’s just unclear at this stage, what economic benefit that will provide.”
Andrews maintained that his government did consider alternatives to scrapping the event, despite suggestions from Games authorities the state was unwilling to do so.
“A team of people from multiple departments worked on possible alternatives,” Andrews said. “We never signed onto running them in Melbourne, but as an act of good faith we went through all the other options … You could not bring this back to anywhere near the budget.”
When asked about the proposed compensation figures, a spokesman for the premier said he would not comment while negotiations were ongoing.
Andrews announced in April 2022 the Games would cost $2.6 billion to deliver, but just 15 months later, he said they would now cost between $6.2 billion and $7 billion.
Two Labor MPs, who spoke anonymously to protect their position, said the government had been hyper-aware of its debt burden, and laughed off suggestions that Deputy Premier Jacinta Allan, who held the Commonwealth Games delivery portfolio, should resign from cabinet over the shambolic outcome.
Daniel Andrews has refused to answer questions about the negotiations with Commonwealth Games authorities.Credit: Joe Armao
A third Labor source said the saga reinforced the perception that Allan had overseen cost blowouts on a number of projects as transport infrastructure minister.
Allan on Wednesday said she was “not one to cut and run” when challenges arise.
“I, alongside the premier and my other colleagues, will roll their sleeves up, work through the detail work through the decision-making processes and work to make the best decisions for the Victorian community,” she told reporters.
Prime Minister Anthony Albanese on Wednesday said he was shocked when he received “a very short heads up” about Tuesday’s announcement.
“It was not something that we were anticipating, given that it’s been in the wind for some time,” he told radio station 2GB.
“I think the regret is for the athletes who will be hurt by this. The idea of competing at your own Games is always a positive thing.”
Former deputy Liberal leader and foreign minister Julie Bishop, who is chair of the Prince’s Trust Australia – a charity with links to King Charles, slammed the decision.
“I am astounded that the premier has cancelled the Commonwealth Games in this fashion,” she said.
“He is sending a message to the Commonwealth countries that Australia cannot afford to host a Games, yet we would expect a developing Commonwealth nation to host it. Is this premier, from one of the wealthiest countries on the planet, signalling the death knell of this sporting contest?”
Consultancy firm EY could be also forced to front a Senate committee examining the Commonwealth Games and potentially table key estimates commissioned by the Victorian government.
Two government and major events sources confirmed EY was behind the $6.2 billion figure. Andrews disputed EY’s involvement in the follow-up figures, but confirmed the firm helped calculate the smaller initial cost of $2.6 billion with other consultants.
He said the government would release “as much information as we can” following negotiations but declined to guarantee the workings would be released.
“No one wanted this thing to cost five, six, seven billion dollars,” Andrews said.
“I am not asking Victorian taxpayers to spend six or seven billion dollars on a 12-day sporting event.
Mars stadium in Ballarat was to be used in the 2026 Commonwealth Games.Credit: Jason South
“We will confirm, for all Victorians, what those costs are, when we know what they are.”
Next month, a federal Senate committee is scheduled to hold public hearings into Victoria’s preparation for the 2026 Commonwealth Games after the Coalition gained support from the Greens to establish the inquiry.
While submissions closed in May, Victorian senator and opposition infrastructure spokeswoman Bridget McKenzie said she would formally request that the committee expand its inquiry to include the cancellation of the regional events.
“The damage to our global reputation, issues of sovereign risk and why there is such a blow out in reported costings needs to be explored and explained,” McKenzie said.
“It is my intention that the Senate inquiry now call witnesses from commercial companies engaged by the Victorian government, such as Ernst & Young, to provide evidence, to help get to the bottom of incompetence and budget mismanagement of the Labor government in relation to the regional Commonwealth Games.”
The state opposition has referred the matter to the Victorian Auditor-General’s Office for investigation.
In a statement, Opposition Leader John Pesutto said: “How was the Andrews government’s $2.6 billion cost estimate so far off the actual cost – a near tripling of the initial estimate?”
“When was the decision made to cancel the Commonwealth Games and for how long was the Andrews government aware of issues surrounding its delivery?”
Victorian Chamber of Commerce and Industry chief executive Paul Guerra said the state’s reputation was in tatters and questioned why the Games could not be held in Melbourne.
Victorian Chamber of Commerce and Industry chief executive Paul Guerra.Credit: Penny Stephens
“It’s disappointing we will suffer reputational damage from this globally. Our trade opportunities that would have come off the back of the Commonwealth Games are now gone,” he said.
Stakeholders bidding for work saw no sign of disarray over the last two weeks, two sources within the private sector said. One had privately questioned the viability of delivering four regional hubs within the budgeted $2.6 billion during the tender processes.
Dozens of police had already been seconded to a Games unit in preparation.
After the cancellation, Andrews unveiled a $2 billion package for regional Victoria in lieu of the Games, including $60 million for tourism infrastructure, $20 million for marketing campaigns in regional areas and $1 billion for 1300 social housing units.
But Victorian Tourism Industry Council chief executive Felicia Mariani said the funding was “simply inadequate for an industry that was banking on lasting benefits of visitation, tourism packages, infrastructure, better transport links and the global exposure for our regions”.
“VTIC is calling for an investment of $80-$100 million in a major game-changing tourism infrastructure fund and $40-$60 million in a regional tourism marketing fund to drive demand in the national and global audiences that these Games were promising to deliver.”
Athletics Australia chief executive Peter Bromley said the government needed to explain how its $6 billion figure was reached.
“I think we need some cool heads to sit down and ask how and why that is,” he told ABC radio. “And, obviously, we need to find a willing partner that wants to participate and keep the 2026 Games alive.”
Andrews on Wednesday reiterated that a Melbourne-based Games still would have cost well over $4 billion, a figure disputed by Commonwealth Games Australia on Tuesday.
When asked whether cabinet had signed off on hosting the Games before contracts were signed, Andrews said “the original decisions were all supported by the government in various ways” and they had cabinet approval.
“Of course it did. The government enters into agreements all the time. I’m not sure who’s speculating differently,” Andrews told reporters.
Katie Sadleir, the chief executive of the Commonwealth Games Federation, said the state’s withdrawal as host of the 2026 Games was devastating for the event and the federation was considering legal avenues after Andrews withdrew from a contract signed in February last year.
“There are a series of clauses that articulate the kind of cash flows that would have happened if the Games had gone on,” Sadleir said. “We are sitting down to look at options to come to a resolution that we will be happy with.”
Commonwealth Games Federation CEO Katie Sadleir. Credit: Getty
A government spokesperson said: “We are engaged in good faith negotiations with Commonwealth Games authorities and will not be commenting until that process is concluded.”
Andrews had repeatedly played down the involvement of Commonwealth Games Australia in negotiations. A CGA source said the authority had a seat at the table in London as a signatory to the contract.
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