First ive heard of a Mk7 engine having crankwalk. It did happen occasionally on the Mk5 and Mk6 GTI and R but mostly only on heavily modified and/or abused engines, and generally on cars with a manual transmission.
Assuming this is an accurate diagnosis by your mechanic, a replacement engine + labour will cost you probably $6-8k. It's probably wise to get a second opinion from one of the many VW specialist mechanics in the Sydney area before committing to anything.
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