Justifications and recriminations are continuing after the Federal Government failed to include money for the highway upgrade in the 2022-23 budget released this week.

More than $2 billion was committed to the east and west sections of the highway duplication in the federal Coalition's May 2021 budget, but the new Labor government has put the money on ice.

The NSW Government says "contracts have been torn up" and "3900 jobs have effectively been put on hold" due to the delay in providing the funding, while a spokeswoman for federal Infrastructure Minister Catherine King told ABC Central West this week that the federal money already committed to the Great Western Highway remained in the budget.

"However, more work needs to be done to properly scope and plan the project as a whole, given there is currently no NSW funding committed to the central section of the project [the proposed tunnel from Little Hartley to Blackheath], without which it cannot reach its full potential," the spokeswoman said.

Susan Templeman, the Labor member whose Macquarie electorate includes Mount Victoria, Blackheath and Katoomba, also drew a distinction between the federal money already committed to the east and west sections of the highway upgrade and the tunnel that is proposed in the middle.

The Blue Mountains Gazette reported that Ms Templeman said the delay in providing the billions committed to the Great Western Highway would ensure the project is delivered with better value for money.

"Let's be clear that what's involved here are the two ends of a tunnel, not the tunnel itself," she said.

"There has never been any state or federal funding for the tunnel, in spite of commitments made to our local communities by the NSW Government.

"Not only is there no money announced for the tunnel by the NSW Government, but there is no business case that we've seen, and certainly no environmental impact studies done for what is proposed to be the longest road tunnel ever built in Australia.

"The NSW Government now has an opportunity, without artificial time pressures of an imminent election, to work through this massive proposal so that it has the best outcomes for Blue Mountains drivers and residents."

The duplication of the Great Western Highway from Katoomba to Lithgow was announced by the NSW Government in Bathurst in the lead-up to the 2019 state election.

The government announced in October 2020 that it would build a tunnel under Blackheath as part of that duplication and then said in May 2021 that it was investigating building a longer tunnel, bypassing Mount Victoria and Blackheath.

It confirmed in May this year that it would build the long tunnel, from Little Hartley to south of Blackheath, and that it would be toll-free.

The tunnel seemed in doubt after a report from the independent Infrastructure NSW was released in May in which it was recommended that a number of "mega" projects, including the tunnel, be put to one side.

But Deputy Premier and Bathurst MP Paul Toole and Mr Farraway both subsequently stressed that nothing had changed in terms of the plans for the tunnel and the timeline for its design and construction.

Mr Toole has previously said that the NSW Government had committed its money for the tunnel, but it would need Commonwealth Government money to make it a reality.

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