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Melb East West Link cost now above $1.2b

AAP logoAAP 22/09/2016 Angus Livingston

Two years after promising it wouldn't cost a cent to rip up the East West Link contract, Victoria has added another $84 million to the $1.1 billion cost of not building the road.

Premier Daniel Andrews promised in 2014 he could get out of the deal without paying a cent but the Auditor-General found ripping up the contract cost the state more than $1.1 billion.

Now another $84 million has been added to the total, thanks to a complex financial swap arrangement for the dumped toll road being closed out at $301 million.

The swap arrangement was set up to hedge against a rise in interest rates, but when interest rates stayed low the government was left on the hook for more money than expected.

The swap cost started at $191 million, rose to $217 million, and kept rising to $301 million before the government chose to pay it out rather than hope it would decrease.

"Closing out these swaps was the right thing to do - and ends a sad tale that started with the Liberals signing a contract and a side letter before the election for a road Victorians did not want," Treasurer Tim Pallas said on Friday.

Opposition spokesman John Pesutto said Labor had wasted more than $1.2 billion on a road that needs to be built.

"This has been the most expensive lie in Victoria's history from a state government," he told reporters.

The previous coalition government signed the contracts for the toll road just days before calling the 2014 election.

The East West Link would have connected the Eastern Freeway and CityLink through a tunnel underneath Melbourne's congested inner northern suburbs.

The federal government has set aside $1.5 billion for Victoria if it ever chooses to build the project.

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