Victoria will only get $877m in federal funds for leasing the Port of Melbourne – not $1.45bn – because its government has “wilfully misunderstood” the federal government’s asset recycling program, the treasurer, Scott Morrison, has said.

At a press conference in Canberra on Tuesday, Morrison claimed the federal government had only committed to give funds for certain projects and the decision to ditch the East-WestLink in favour of removing level crossings meant the state would not get the full amount.

The Victorian government leased the port for $9.7bn and hoped to receive a 15% top-up from the federal government’s asset recycling scheme.

Morrison said that Victoria had missed the 30 June deadline and would only get 15% of the amount of funds it committed to projects that are agreed with the commonwealth.

“It’s not 15% on the sale price, it’s 15% on the agreed apportionment of funds to projects, that come from the asset recycling process,” he said.

Morrison said by the time of the May budget the Victorian government had only put forward the Metro and Murray Rail so the federal government applied the 15% ratio only to the funds to be spent on those projects.

That resulted in an offer of $877m in federal funds, which the Victorian government refused.

“I think there has been some misinterpretation and wilful misunderstanding on behalf of the Victorian government,” Morrison said.

In June the Victorian government wrote to Morrison – before the scheme’s deadline – saying the money would also be used to remove level crossings.



The treasurer did not respond to that letter until after the port had been leased, when he said the scheme had ended and Victoria had not signed an agreement over funding.

On Tuesday, Morrison said the federal government would still pay out $877m despite the expiry of the scheme. He blamed Victoria for not getting the full $1.45bn, noting its decision to spend $1bn not to construct the East-West Link meant it did not argue from a position of strength.

The Victorian treasurer, Tim Pallas, has disputed that the state missed the deadline, saying it was eligible for funds because it announced intention to lease the asset before the deadline.

New South Wales got more than $2bn for selling Transgrid for $10.25bn.

When the former treasurer Joe Hockey announced the scheme it was clear states and territories would get 15% of the price of the asset sold “if all the sale proceeds are allocated to new infrastructure investment”.



Hockey also said selection of the assets to be sold and the infrastructure to be built was entirely up to state governments.

Victoria is the fastest-growing state in the nation and home to a quarter of all Australians but gets just 9% of federal infrastructure funding.

• Australian Associated Press contributed to this report