Splashing $3 billion on a huge infrastructure project in Victoria shouldn't be hard to do.

Prime Minister Tony Abbott wants to spend the money; Premier Daniel Andrews wants the money.

Easy, right?

Not when the $3 billion was set aside for a coalition-backed project the new Labor government has dumped.  The $6.8 billion East West Link road tunnel project is gone, and in its place is a Labor plan to remove some suburban level crossings.

Important and expensive work, but not the “project of national significance” the federal government demands.  Right now, the two sides are circling around a solution.

Mr Abbott has to spend the money in Victoria or face an electoral backlash he can ill afford.

Mr Andrews needs money for his level crossings, or face a black hole in his first budget.  But Mr Abbott says he won’t fund suburban rail projects and doesn’t want to cave in to a Labor leader.

So the delicate challenge is to find a project the coalition can support and Labor can agree to.

It won’t be suburban level crossings, it’s unlikely to be Labor’s long-promised Metro Rail tunnel, and it definitely won’t be the East West Link as currently proposed.

The other billion-dollar battle Mr Andrews is fighting is with East West Connect, a consortium that signed a deal to build the project just weeks out from the election.

The previous government left a poison pill in the deal – reportedly up to $1.1 billion in compensation if it was broken.

The premier was asked whether he would legislate to avoid paying compensation to East West Connect and he readily volunteered this: “I wouldn’t rule it out.”

Mr Andrews didn’t have to say it, so the message was clear – play ball or we’ll take the bat and go home.

He’s betting on paying a small amount for costs incurred and walking away without paying a cent in compensation.  The gamble could end up in court.

It’s a high-stakes game and a wrong move could wipe billions of dollars from Victoria’s budget.

But get it right, and Mr Andrews starts his term with $3 billion for infrastructure and a solid boost to the budget bottom line.


By Angus Livingston