The Napthine government’s pledge to begin work on the East West Link by the end of the year is in disarray, with financiers close to the project saying construction will be postponed until a looming court case is resolved.
It comes as the Abbott government considers withdrawing $3 billion of federal funding earmarked for the project if Labor wins the state election.
Victoria is also facing a potential compensation bill worth hundreds of millions of dollars if the project is scrapped.
On Thursday The Age exclusively revealed that a Labor state government would use a court battle initiated by two inner-city councils to render contracts for the eastern section of the multibillion-dollar toll road invalid.
Two financiers close to the project said the issue has created considerable uncertainty for the preferred bidders.
One said the consortium would not be putting money out the door or starting any work on the project until this issue had played out in the courts.
They would sign it but not commence construction until the validity of the contract was proven, he said.
Labor’s extraordinary move was met with a chorus of criticism from business groups and the Napthine government.
Treasurer Michael O’Brien said Labor’s position was “economically insane”, would cost Victoria $3 billion and 6200 jobs, and was a stunt designed to fend off the Greens in inner-city seats.
He said no one would want to do business with a Labor government that was prepared to “rip up contracts and … go back on their word.”
“We are not going to be held hostage by Mr Andrews and his reckless behaviour, we are going to get on with negotiating the final stages of these contracts, signing the contracts and getting on with building the East West Link.”
A spokeswoman from Lend Lease, who lead the preferred consortium for the project, said the construction giant would not comment because they were in discussions with the Napthine government.
But it is understood the consortium would seek compensation costs if Labor was elected and abandoned the project. A government source said this could leave Victoria with a bill as high as $1 billion.
Opposition leader Daniel Andrews said the government should delay signing the contract until after the November 29 poll.
He referred to legal advice given to Labor which found that no contract could be safely entered into while the Yarra and Moreland councils’ case was under way in the Supreme Court. The case is due to be heard on December 15, more than two weeks after polling day and after contracts had been signed.
“If we win the election then we will not proceed with this project,” Mr Andrews said.
But Victorian Employers’ Chamber of Commerce and Industry chief executive Mark Stone said scrapping the project would be of “great detriment” to Victoria.
“There is overwhelming support for this project among Victoria’s major business and motoring groups, including the RACV, and it is also supported by a number of key union organisations,” he said.
Greens leader Greg Barber also hit out at the plan, saying it proved that Labor felt threatened by the Greens’ state election campaigns in inner-city seats.
“Their position is if, if, if, if, then maybe. It’s another flip flop … previously their position was based on what Denis Napthine may or may not do, now it is based on what a court may or may not do.”
And Australian Industry Group’s Victorian director Tim Piper said the move would undermine business certainty.
Federal Transport Minister Warren Truss said only the Coalition would deliver the “desperately needed” road and Labor was putting the “investment in jeopardy”.
“Labor is up to its usual antics. Getting in the way of progress in the name of cheap political opportunism.”
But those opposed to the East West Link, welcomed Labor’s high-stakes gamble.
Public Transport Users Association president Tony Morton also welcomed the move, saying Labor had made November’s election a defining moment for the city’s transport policy.
“With every week the stakes become clearer for the future of Melbourne,” he said.
Protest organiser Anthony Main said the move was a positive development, but it wouldn’t stop the community from protesting until it was certain the road would not be built.
“It’s still not ruled out,” he said. “We are going to continue to keep the heat on.”
Yarra mayor Jackie Fristacky said it was “gratifying” that Labor had articulated its stance and their advice was consistent with other legal opinions.
– with Steve Lillebuen, Adam Carey
