The Gillard government has pledged $3 billion for the Melbourne Metro rail tunnel, pitting it against the federal opposition, which has promised to spend half as much on the east-west road link. This comes on a day when The Age revealed that the planned east-west link would have to be three times the current cost of an average trip on CityLink for the project's investors to make a profit. Loading Replay Replay video Play video Play video Ensuring road versus public transport funding will be a key focal point for Victorian voters at the September 14 federal election, the budget has revealed the $9 billion project – involving a nine-kilometre rail tunnel from South Kensington to South Yarra with five new stations – will be one-third funded by the Commonwealth if Labor wins. But that contribution, which will stretch over about a decade, is contingent on the Napthine government also chipping in $3 billion. The remaining $3 billion would be raised through a public-private partnership secretly sketched out by federal Infrastructure Minister Anthony Albanese and state Transport Minister Terry Mulder.

$3 billion has been allocated for a Melbourne rail tunnel. Credit:Craig Abraham Under the plan, both governments would make ''availability payments'' to a private sector provider to build and possibly run the new line, which is expected to provide capacity for an extra 20,000 passengers per hour. This would ensure a guaranteed rate of return, making it attractive to superannuation funds and other investors. The ongoing payments, which do not appear to have been included in the budget, would be split equally between the Commonwealth and the state government. The funding promise, revealed by Fairfax Media last month, stands in contrast to Mr Abbott's pledge to spend $1.5 billion on the east-west road link connecting the Eastern and Tullamarine freeways. The state government also announced funding of $300 million for that project in last week's state budget, with just $10 million for the rail tunnel.

Mr Abbott last month said there would be no Commonwealth money for commuter rail projects if he was elected prime minister. State Treasurer Michael O'Brien warned that the federal election would be a referendum on the east-west road link. Mr O'Brien said voters in marginal federal Labor seats east of the city – including Deakin, La Trobe and Chisholm – would punish Labor for not funding the road. But the Commonwealth funding arrangements for the rail tunnel remain opaque. The budget papers only reveal the money will be taken from its Nation Building Program, which is funding 36 other projects across the nation. It is understood the Napthine government does not want to begin building the rail tunnel until 2015-16 – after the state election. Mr Abbott and the state government are backing the road project over the rail project despite the lack of a business case, including traffic projections and a detailed analysis of benefits and costs. The Metro rail project, which is seen as necessary before other key public transport projects can begin, has been assessed by Infrastructure Australia as ''ready to proceed''. It is understood that Mr Mulder last night sent a letter to Mr Albanese warning the east-west project is ''ready to go'' - and the Metro is not.

Mr O'Brien last night told Fairfax Media that there were serious concerns about the ''sequencing of the two projects'', warning Melbourne did not have the labour to cope with both projects. Prime Minister Julia Gillard said on Wednesday that the Victorian government was still waiting to receive a good business case from the Victorian government on the east-west road project. Ms Gillard says spending money on public transport projects such as the Melbourne metro tunnel will ease the congestion on city streets. ''In this budget we have very much focused on public transport infrastructure,'' she told Gold FM radio in Melbourne. ''We are spending more money on public transport infrastructure than has been spent in the whole history of federation, because that does change congestion on our city streets.''

The Prime Minister said she was happy to work with the Victorian government. ''On East West we are still waiting for comprehensive plans and a good business case from the Victorian government to be put in to Infrastructure Australia,'' she said. Loading The budget papers also include $525 million to complete 38 kilometres of improvements on the M80 Ring Road, $69 million to improve traffic management on the Monash Freeway and a previously announced $258 million contribution to continue duplicating the Princes Highway between Winchelsea and Colac. Mr Albanese said Mr Abbott had failed to understand that the Commonwealth should invest in road and rail. ''His opposition to any rail funding would ensure traffic gridlock in our cities, making them less liveable and sustainable,'' he said.