The Victorian government says the state's airport rail link won't be completed on time due to "challenging" negotiations with Melbourne Airport.
Deputy Premier and Transport Minister Jacinta Allan addressed speculation the airport rail link had been put on hold, saying the project remained a significant priority for the Andrews government and the community.
But she revealed the 2029 completion date would not be met because of what she described as slow and frustrating negotiations with the private operator that runs Melbourne Airport about issues including how to continue running the airport during construction of the rail line.
"I'll be really frank with you," Ms Allan told ABC Radio Melbourne.
"It has been challenging to negotiate with the airport about how the project will be delivered on the land that they lease from the federal government to run the airport.
"It's been slower than I would have liked."
Ms Allan said the slow pace of the negotiations had "pushed out" the time line of the project but did not reveal when she now expected the rail service would begin.
She said the project's future also hinged on the outcome of the state and federal budgets.
"We are in conversations right now with the federal government," Ms Allan said.
"The feds have got theirs in three weeks. Ours is five weeks away.
"I just can't confirm anything ahead of those final decisions that are taken by either level of government.
"I appreciate that's frustrating."
Melbourne Airport said it remained a strong supporter of the rail project but hinted at a disagreement about some aspects of the development.
"We note that the airport rail station needs to work for all people who come to the precinct, not just those who will come by train," a spokesperson said.
"Melbourne Airport has been working constructively with Rail Projects Victoria to progress the project and achieve a rail link that is fit for Victoria's international gateway."
The airport said the completion date was a matter for the government and it was awaiting clarification.
Economist says slowing major projects a 'good decision'
A council in Melbourne's north-west said it was considering calling an urgent meeting to discuss reports the project had been put on hold due to budgetary pressures.
Moonee Valley mayor Pierce Tyson says the community desperately needed the new East Keilor/Airport West railway station that would be created as part of the rail link development.
"It's deeply distressing for our community," Cr Tyson said.
"They have been waiting for many decades for this announcement and for this project to finish."
Cr Tyson said the project continued to have the backing of the community and the council.
RMIT economist David Hayward said he would not be surprised if the state government was putting projects on hold given rising building costs and high interest rates.
He said it was likely the May budget would be "pretty tough".
"It's quite appropriate that it'd be tough because the economy is running pretty hot," he said.
"There's no point having high interest rates and a budget in big deficits, they've got to start reining in spending to take some of the pressure off interest rates.
"So slowing the rate of spend — not stopping the spend on infrastructure, because infrastructure spending is good — but slowing it is a good decision."
