Prime Minister Malcolm Turnbull is attempting to keep alive the dumped East West Link with the ongoing offer of $3 billion for the controversial tollway, but is so far offering just $10 million for the Melbourne Metro project.
In a letter which has apparently not yet been received by Premier Daniel Andrews or Treasurer Tim Pallas, federal Treasurer Scott Morrison has reiterated former prime minister Tony Abbott's "locked box" promise to hand over $3 billion to the first Victorian government prepared to build the East West Link, which was sensationally scrapped by the Andrews Government after the 2014 state election.
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PM promises $3b to recall East West Link
Malcolm Turnbull talks about a funding boost for Victorian roads with 3AW's Neil Mitchell.
The letter, provided to The Age, states: "Our offer of $3 billion still stands should any Victorian Government choose to proceed with the project."
Australia's auditor-general late last year recommended that the Commonwealth take action to recover $1.5 billion of federal money hastily given to Victoria by Mr Abbott for the road. But in an apparent act of conciliation, the letter reveals efforts will not be undertaken to claw the money back.
"Both our governments can agree that the people of Victoria would rather we proactively work together and get on with building the infrastructure that will make a difference to their lives," the letter states.
It states that the Commonwealth will allow Victoria to keep the $1.5 billion currently earning interest in a state treasury account "on the condition that it is matched with dollar for dollar contributions" by Victoria on various transport projects.
Those projects include $350 million to upgrade the Western Ring Road, $220 million towards the Murray Basin freight rail upgrade and $500 million on the Monash Freeway upgrade.
The letter also warns that Victoria will need to "decouple" its proposal to upgrade the Monash from its Western Distributor proposal to build a toll road connecting the West Gate Freeway to CityLink via a tunnel and raised viaduct.
"The Commonwealth will continue to work with your Government to explore all options for innovative financing for the remaining toll road components of the Western Distributor, including equity and concessional loans, ready to make a decision when Infrastructure Australia completes its assessment of the business case," Mr Morrison says.
Mr Morrison says the government is also committing $345 million - to be matched dollar for dollar by Victoria - for rural and regional highways and $75 million for urban congestion.
But so far the Turnbull government has committed just $10 million to help plan the Melbourne Metro. "We agree that the Melbourne Metro will transform Melbourne, driving productivity, jobs and outcomes such as urban renewal," Mr Morrison says.
Mr Turnbull said on Friday that the Metro Rail Link was a "very exciting project" but not enough work had been done to claw back value that would be added to real estate near the new railway stations.
"We will support the Melbourne Metro substantially in the future but we've got to do the homework right," Mr Turnbull told radio station Triple M.
"We think that has been underdone to date so we are proposing to spend $10 million to do a further analysis of how we can capture value from the development."
Mr Turnbull said government land around the proposed Arden Station in North Melbourne was one area ripe for revenue raising.
"It is only fair to capture some of that value to contribute to the project," he said.
He said that the projects announced on Friday were priority projects in the eyes of Infrastructure Australia that were "crying out for investment".
On 3AW later Friday morning, Mr Turnbull said "the only thing standing in the way of [the road building] is the commitment of the Victorian government, the money is there, we simply have to get on with it."
Asked whether state or federal government called the shots on infrastructure projects, he said that 'each government decides where their own money goes, but the reality is that the projects that we have identified are ones that are clearly national priority projects."
State Treasurer Tim Pallas said he had always maintained the money had belonged to Victorians. "It's good that the Turnbull Government finally agrees," he said. "We have lots of projects ready to go and we'll work positively with the Commonwealth to deliver these projects that Victorians voted for and need."
With Patrick Hatch and Richard Willingham