The facility, which is taking shape on the block opposite the site of the troubled inpatient building, was being squeezed by "inflationary pressures and programme delay", Treasury’s quarterly investment update to Cabinet said.
These factors meant the budget for the outpatient building was "under pressure", the document, which was released on Thursday, said.
The expected opening of the building, which will contain clinic rooms, day surgery facilities and radiology, has now been delayed by nine months to September 2026.
"Delays in signing main contractor contract add to the risk of price escalation increases and continuing cost churn."
The delay will also push out the start and completion dates of the project.
Treasury warned this could lead to the public losing faith in the project.
This lack of support presented a risk to the project, the update said.
"The project continues to suffer from wider disruptions from the lack of community and clinical support.
"Extensive community and clinical engagement will be needed to successfully communicate the preferred option and empower the Te Whatu Ora Health NZ team to progress successful delivery."
The entire project remains at "high risk".
In January, Health Minister Simeon Brown announced the government would press ahead with a scaled-down version of the inpatients building at $1.88billion.
It came after months of speculation after the government said in September last year it was deliberating over whether to build the inpatients building at the former Cadbury’s site, or retro-fit the existing hospital.
HNZ infrastructure delivery lead Blake Lepper defended the organisation and its communication with the public when asked about the Treasury report.
"We have endeavoured to update stakeholders, including the health sector, local tertiary organisations, and local government, on a regular basis.
"We have also provided the Dunedin and wider Southern community with updates on the progress of the new Dunedin Hospital through social media, press releases, public forums and on our website."
He said the outpatient building "remains on track to open in 2026".
HNZ was undergoing commercial negotiations for the inpatient building, and "we anticipate we will be able to say more once the negotiation process has been completed", he said.
Health commentator Ian Powell said the delays did not surprise him at all.
"The only legitimate delay has been the main pandemic period.
"What Dunedin is presently experiencing is what Christchurch experienced in the 2010s over their new acute services block.
"In both cases good work was done in developing the two DHBs’ business cases ... but the shared problem was central government’s top-down and distant control which delayed things considerably."
Mr Powell, a former executive director of the Association of Salaried Medical Specialists, said HNZ’s problem was not just its inability to communicate.
"HNZ has been dysfunctional since its inception, so poor communication is no surprise. However, the real problem is not poor communication — that’s a consequence — but the culture within central government."
He said Dunedin’s delays were made worse by the "poorly thought-out intervention" by Infrastructure Minister Chris Bishop and then-Health Minister Shane Reti last September.
