The budget for the Forrestfield to Perth Airport railway line has jumped to $2.2 billion, while the completion date for the project has be pushed back by two years to 2020.
The project was expected to cost $1.9 billion and be competed in 2018, but the government says the additional $300 million has been added for contingencies and escalation factors due to the delay.
But it has not revealed how it will pay for the project, although Premier Colin Barnett has signalled that asset sales are a likely option.
He released details of the eight-kilometre underground rail line at the Liberal party state conference on Saturday.
Mr Barnett said there would be two underground tunnels beneath the Swan River and Perth Airport, providing a public transport link to the airport, especially for fly-in fly-out workers, and a 20-minute rail journey from the eastern suburbs into the city.
The rail line would head east from the Midland Line, near Bayswater Station, and then tunnel under the Swan River and Tonkin Highway before reaching the airport, and then go on to Forrestfield, Mr Barnett said.
Plans show a station at Belmont near the domestic terminal, a station under the Consolidated Airport at the international terminal, and a bus-train interchange station in Forrestfield.
Mr Barnett said the project would create hundreds of construction and engineering jobs.
Works will start in 2016 with completion expected in 2020.
The project is predicted to service 20,000 people a day in 2021, increasing to more than 30,000 by 2030.
Despite saying at the state election that the project was fully costed, Transport minster Dean Nalder conceded that until tenders were received in 2015, it was difficult to estimate the precise cost of the project, but said he hoped it would would be less than $2 billion.
Mr Nalder said the Project Definition Plan would be released in the next couple of weeks.