East West Link: Tony Abbott lashes out over scrapping of project

East West Link: Tony Abbott lashes out over scrapping of project Mark Kenny Chief political correspondent

Tony Abbott has left open the option of taking back nearly $1.5 billion in federal funding for the East West Link as he lashed out at the Victorian government, accusing it of “recklessly” destroying 7000 jobs, adding to traffic congestion and damaging Australia’s reputation for safe, reliable infrastructure investment.

But it is also possible that the East-West funds could sit on the asset side of the Victorian government accounts indefinitely or that they could be used for other projects even though Canberra remains officially opposed to funding urban public transport, as Victoria would like to do.

“We will talk to the Victorian government about other projects, but the truth is there is no other major shovel-ready project in Victoria,” Mr Abbott said.

Contractors will receive $339 million after the Victorian government abandoned plans to build East West Link

The conciliatory tone of that comment may reflect nervousness by federal Liberals in Melbourne’s eastern suburbs over the unpopular project.

But Mr Abbott’s anger at the Andrews Labor government for shelling out $339 million to the consortium in order to abandon the project was otherwise undisguised.

Branding the decision a massive setback which would cause “dismay” in investment global circles, he said tearing up the contract had sent out all the wrong signals.

“The Victorian government’s decision to abrogate contractual responsibilities sets a dangerous precedent for future projects and threatens further investment in much-needed infrastructure in our country,” he said.

“They have damaged investor confidence in major infrastructure projects.

“Australia can’t afford to discourage private investment in infrastructure because government alone cannot afford to build the infrastructure that our country needs.”

The Prime Minister said it was deeply concerning that the second most populous state now had no large projects ready to commence.

Mr Abbott said traffic congestion was a major social and economic problem in Melbourne and had been ignored by the new government.

“The East West Link is the only answer,” he said. “Tens of millions of dollars and years of planning have already been invested to get the project shovel-ready.

The federal government is now considering its options but has not given up on the project, with Mr Abbott advising that despite the official demise of the project under Labor, $3 billion from the Commonwealth remains “on the table for any Victorian government which wants to build the East West Link”.

“The tearing up of this contract damages Victoria’s reputation as a place to do business, as has been proven by revelations this week that the French and Spanish governments have made direct representations of concern to Victoria,” Mr Abbott said.

Relations between the Abbott government and the states have sunk to new levels of distrust as premiers travel to Canberra on Thursday for a Council of Australian Governments meeting on Friday.

That meeting is expected to be dominated by grievances over the withdrawal of tens of billions in federal funding for hospitals over the next nine years, and an incendiary dispute over the carve-up of the the $57 billion GST pie.

Deputy Liberal leader and Foreign Minister Julie Bishop, Treasurer Joe Hockey and Finance Minister Mathias Cormann are the most senior members of the government known to favour a special deal for Western Australia to address a sharp drop in GST revenue due to the three-year averaging formula used by the Commonwealth Grants Commission to apportion GST revenue to the states.

That formula has not yet taken account of the collapse of iron-ore royalties in the once-booming west but other states say neither had it taken account of the dramatic rise in revenue the state received from royalties when the resources boom surged from 2008.