Victoria to pay $380million compensation for cancelling Commonwealth Games

The Victorian government has agreed to pay Commonwealth Games bodies $380 million in compensation after cancelling the 2026 event.

Premier Daniel Andrews made the shock announcement last month that Victoria would not host the Games as planned due to concerns they would far exceed initial cost expectations.

“We’ve closed this out now so that we can get on and build thousands of houses for regional Victorians, and the Commonwealth Games authorities can get on and find somebody to host the Games in 2026,” Mr Andrews told media on Saturday.

Mediation began last month between the State of Victoria, The Commonwealth Games Federation (CGF), Commonwealth Games Federation Partnerships (CGFP), and Commonwealth Games Australia (CGA).

Following confidential “good faith” discussions, Victoria agreed late on Friday night to pay the three parties a total of $380 million.

“All parties engaged respectfully and made appropriate concessions in order to reach an agreement,” the groups said in a joint statement.

Settled once and for all

“The settlement finalises all matters between the parties.”

The parties started in “different solar systems” in terms of expectations, according to Mr Andrews, but had arrived at a reasonable settlement.

Mr Andrews said according to legal advice it is the best deal Victorians could have hoped for, and other options were to push on with the Games at a bloated cost of up to $7 billion, or engage in a protracted legal fight he described as a “lawyers’ picnic”.

The settlement falls under what was set aside in the 2022/23 budget for tourism and major events and will have no further impact on the state’s balance sheet.

State auditor-general Andrew Greaves will undertake a probe of the Games cancellation which Mr Andrews said the government would seek to learn from.

Victorian opposition leader, John Pesutto said the saga had damaged Victoria’s reputation internationally.

“Victorians will pay at least $380 million for an event that will never happen,” he said.

Appointed as mediators in the process were former New Zealand Judge, the Honourable Kit Toogood KC and the former Chief Justice of the WA Supreme Court, the Honourable Wayne Martin AC KC.

Post-COVID complications

In cancelling the regional Victorian Games on July 18, Mr Andrews cited a forecast rise in costs from between $2 billion and $3 billion to between $6 billion and $7 billion.

Victorian Treasurer Tim Pallas said the world had changed considerably since the contract was agreed to, citing the invasion of Ukraine, COVID fall out and interest rate hikes.

During mediation the Commonwealth Games parties agreed that the multi-hub regional model was more expensive to host than the traditional models.

Mr Andrews has repeatedly said he would not spend up to $7 billion to host the event and dismissed the idea of moving the Games to Melbourne, which he said would still have cost more than $4 billion.

A newly released costings document estimated the extra cost pressures at about $2 billion, citing compressed timelines, supply constraints, accommodation shortfalls and major sports code displacement costs.

Requirements by the Commonwealth Games Federation for athletes’ villages saw the cost of accommodation alone jump from an estimated $200 million to well over $1 billion.

Also putting pressure on the event according to the new costings, was an estimated general operations price tag of close to $1.5 billion, up from an initial $1.1 billion.

Transport costs surged from $110 million to over $300 million, while potential police and security spending ballooned to almost half a billion dollars compared to early estimates of $200 million.

Probers set to work

State and federal inquiries have been set up to investigate the cancellation of the 2026 Games.