East West Link money could stay in Victoria: Abbott

Money earmarked for Melbourne's dumped East West Link could be spent on another Victorian project of national significance, the prime minister says.

Victoria's Labor government is negotiating to break the controversial road tunnel contracts, which were signed by the previous state government.

Prime Minister Tony Abbott says he is talking to Premier Daniel Andrews about spending the $3 billion set aside for the East West Link on other projects.

"But they really do have to be important projects of national significance and what he can't do is keep the East West money and spend it on whatever he likes," Mr Abbott told Fairfax radio.

"It's got to be something which the Commonwealth Government believes is important, economic infrastructure of national significance."

Mr Abbott said he wanted to see cranes and bulldozers building projects in the state.

"I am not going to rip off Victoria," he said.

Mr Abbott urged Mr Andrews to build the East West Link rather than pay a reported $1.1 billion in compensation to the building consortium.

"To pay a billion dollars not to build a road is just insane," he said.

Mr Andrews said he won't break his pre-election promise to not build the road.

He's confident he can do a deal on the funding.

"Yes, absolutely, I think we can," Mr Andrews told Fairfax radio.

Mr Andrews is standing by another promise not to pay compensation to the East West Connect building consortium, but says paying for costs incurred is sensible.

He declined to say how much compensation would be required.