The Prime Minister and the Victorian Premier could be heading for a showdown, following a heated exchange of letters this week.

Tony Abbott has written to Daniel Andrews to warn him that Australia's financial reputation could be at risk if the state ditches its East West Link contracts.

The new Victorian Government has vowed to scrap the road-building plan that would have been supported by the Federal Government to the tune of $3 billion.

Premier Daniel Andrews say he would even bring in new legislation to avoid the contracts.

Mr Abbott addressed that idea in his letter.

“I am concerned that plans to legislate away the rights of the East West Link consortium will damage investor confidence and jeopardise further private sector investment in important nation building projects around the country,” he wrote.

“National and international infrastructure companies and financial institutions are already raising their concerns about your actions with both of our governments as well as with other state and territory government around the country.

“Any legislation to abrogate contractual rights would raise sovereign risk issues and have implications for not only Victoria but the rest of the nation.”

Mr Andrews’ response was blunt.

“Be assured we will take more care getting Victorians out of the disastrous East West deal than the former Liberal state government took getting us into it,” Mr Andrews wrote.

“I look forward to working with you on important infrastructure projects, but no amount of hysteria or attempted bullying or blatant politicking will change the result of the 2014 Victorian election.’

Andrews referred to the fact the Prime Minister called last year's state election a “referendum” on the East West Link.

“While I note you have broken significant election promises, including savage cuts to health and education and changes to the aged pension, my government will be one that honours its election commitments in full,” Mr Andrews wrote.