Premier Daniel Andrews' government will not build the road, despite concerns compensation to the East West consortium potentially running up to $1.2 billion.

Prime Minister Tony Abbott has urged the Victorian government to build the project and labelled last year's election a referendum on the East West Link. He has urged Mr Andrews to break his "silly promise" and build the road .

On Thursday he told radio station 3AW that it was "just insane" for the Victorian Labor government pay more than $1 billion in compensation to not build the road.

Facing a hostile Victorian electorate, Mr Abbott said re-directing the money - $3 billion has been allocated for the full East West Link - was a real possibility.

"I am not going to rip off Victoria," Mr Abbott said. "I'm happy to talk to him [Andrews] about other important projects of national significance."

The Victorian government has a number of infrastructure plans including the West Gate Distributor road and building a new train line under the city – the Abbott government has refused to fund urban rail, arguing it the sole domain of state governments.

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

Mr Andrews declared that the new Victorian Labor government had enjoyed a good start to its relationship with the Abbott government.

The Premier said he and Mr Abbott had enjoyed "very productive" and positive discussions about how politics could be put aside to build major projects in Victoria, and he is encouraged by private conversations and public comments from the Prime Minister.

"I am very confident that we are going to get a good outcome for the people of our state and I want to thank the Prime Minister for the constructive way in which he has approached this," Mr Andrews said.

"There will be no shortage of important projects that the federal government will partner with us to build."

The $500 million West Gate Distributor, which was released for expressions of interest on Wednesday, could be a target for federal funding with Mr Andrews indicating the issue had been raised.

With the fate of domestic military shipbuilding under a cloud, Mr Andrews said he had been encouraged by recent comments from the federal government on the issue.