Report Finds South East Water and Mornington Peninsula Shire to Blame for McCrae Landslide

The Allan Labor Government has accepted all 12 recommendations from the Independent Board of Inquiry into the McCrae landslide, which found that a burst South East Water main and years of inaction by the Mornington Peninsula Shire Council combined to cause one of the region’s worst infrastructure failures in decades.

The 300-page report, tabled in Parliament on Wednesday, confirmed that prolonged leakage from a burst water main near Bayview and Outlook roads saturated the slope and triggered two major landslides in January 2025 that destroyed homes and displaced families.

It also identified deep systemic failures in both South East Water (SEW) and the Mornington Peninsula Shire Council (MPSC), finding that the disaster was preventable and worsened by a lack of leadership, oversight and planning.

Government Accepts All Recommendations

Minister for Local Government Nick Staikos said the Government had accepted all 12 recommendations and would act immediately to help affected residents.

“It was crucial that a properly independent inquiry was established to allow residents’ voices to be heard and to identify measures to prevent this from happening again,” Mr Staikos said.

“The landslides have taken a significant toll on residents and I call on South East Water and the Mornington Peninsula Shire Council to work with the McCrae community to achieve the best possible outcomes.”

The Government will appoint an independent mediator to oversee remediation and mitigation works between the Shire, South East Water and affected landowners.

The process is expected to begin within weeks and take around three months to complete.

Shire Failures Spanned Two Decades

The Inquiry found that the Mornington Peninsula Shire failed to act on repeated expert warnings dating back to 2002, which identified McCrae’s escarpment as highly susceptible to landslides.

Despite receiving geotechnical advice in 2002 and again in 2012 recommending the introduction of an Erosion Management Overlay (EMO) to guide planning and development, the Shire never implemented it.

The report found that the Shire’s inaction, poor coordination and limited understanding of landslide risk left the community vulnerable when the January 2025 landslides occurred.

“The Shire’s leaders, including the Mayor and Acting CEO, appear to have trusted that enough was being done… The Shire’s executive leadership adopted a passive approach, leaving the response inadequately resourced. That was unsatisfactory.” — Board of Inquiry Report, p. 244 [196]

It also found the Council’s executive leadership took no substantive role in managing the risk of a further landslide after the first collapse on 5 January, despite warnings from engineers that there was a “significant high-risk” of another failure.

“Following the 5 January 2025 landslide, the Shire did not appropriately resource its response… Given the seriousness of the situation, the Shire’s executive leadership should have exercised oversight and provided guidance. The Mayor should also, at the very least, have required regular, detailed updates.”
— p. 245 [197]

The Inquiry concluded that:

“The Shire fell short of its commitment to the highest standards of performance, behaviour and service. Residents have lost trust and confidence in the Shire.”
— p. 259 [Chapter 6 Summary]

The Board warned that without decisive leadership, displaced residents could remain without homes for years.

“The Shire now needs to adopt that same approach in rebuilding its relationship with the residents of McCrae and in assisting to provide practical and timely solutions for residents… Unless this occurs, the Board fears that the residents who have already been displaced from their homes for far too long will remain displaced for many years to come. That is not a situation the Shire should accept or tolerate within its community.”
— p. 260 [Conclusion]

Mayor Anthony Marsh said the Shire accepted the report’s findings.

“The Shire generally accepts the findings of the report and is already progressing a number of the recommendations,” Cr Marsh said.

“This has been an incredibly difficult time for residents impacted by the McCrae landslide, and we will continue to work closely with them. Community safety remains our highest priority.”

South East Water Criticised for Delays and Poor Accountability

The Inquiry found that South East Water’s failure to detect and repair a burst main for nearly five months directly caused the January 2025 landslides.

An estimated 40 million litres of water leaked downhill toward Penny Lane and View Point Road before the pipe was finally repaired on New Year’s Day.

The Board also criticised SEW’s internal conduct, revealing minutes from its McCrae Strategy Group included remarks such as:

“How do we maintain the confidence of government – that goes towards no admissions.”
and “Be careful of info provided to customers, because then the Board of Inquiry might question us under oath.”
— p. 256 [228]

One SEW executive was quoted asking:

“Should we be cleaning up our internal notes etc before next notice to produce.”
— p. 256 [228]

The Board concluded that SEW appeared “preoccupied with protecting itself rather than discovering the answers” and criticised its lack of insight and accountability.

Recommendations to SEW include a full review of its leak-detection systems, real-time monitoring improvements and independent oversight of its internal response processes.

Resident Response

McCrae homeowners Nick and Kellie Moran, whose home at 3 Penny Lane was destroyed, said the report confirmed what residents had been saying since January.

“The report confirms that the landslides were caused by prolonged leakage from a burst South East Water main that saturated the slope, and that system failures by South East Water and the Mornington Peninsula Shire Council allowed the risk to escalate,” Mr Moran said.

In a public comment responding to Mayor Marsh’s social media post, Mr Moran described the statement as “disappointing”, saying it failed to acknowledge “systemic council failures over almost a decade”.

“The report also states that the Shire has known since at least 2012 that this escarpment was highly susceptible to landslides,” he wrote.

“Despite that, no Erosion Management Overlay was ever introduced, and no serious risk mitigation plan was put in place.”

Entity	Type of Responsibility	Board of Inquiry Findings
South East Water (SEW)	Primary Cause / Operational Failure	Burst water main leaked for nearly five months, releasing ~40 million litres and triggering the January 2025 landslides. Failed to detect, investigate or repair despite repeated complaints.
		“SEW may have been preoccupied with protecting itself rather than discovering the answers.” (p. 256 [227])
Mornington Peninsula Shire Council (MPSC)	Contributory Failure / Governance and Leadership	Ignored expert advice since 2002; failed to implement an Erosion Management Overlay; showed poor coordination and emergency leadership.
		“The Shire’s executive leadership adopted a passive approach… leaving the response inadequately resourced. That was unsatisfactory.” (p. 244 [196])
Victorian Government	Systemic Oversight Role (Non-Fault)	Not responsible for the landslide, but now tasked with ensuring oversight, reform and remediation for affected residents.

Looking Ahead

The Government says it expects all parties — South East Water, the Mornington Peninsula Shire Council and affected residents — to participate constructively in the mediation process so remediation works can begin as soon as possible.

The full Government response and the Board of Inquiry report are available at vic.gov.au.