Vic Belt and Road deal with China torn up

Marise Payne announced on Wednesday night the infrastructure deal had been cancelled under the Commonwealth's new veto powers.

China's embassy in Australia responded swiftly, expressing "strong displeasure and resolute opposition".

"This is another unreasonable and provocative move taken by the Australian side against China," a Chinese embassy spokesperson said in a statement.

"It further shows that the Australian government has no sincerity in improving China-Australia relations.

"It is bound to bring further damage to bilateral relations, and will only end up hurting itself."

Senator Payne on Thursday said the decision to tear up the agreement, along with two older ones between the Victorian government and Iran and Syria, was "very careful and very considered".

"It's about ensuring that we have a consistent approach to foreign policy across all levels of government, and it isn't about any one country, most certainly not intended to harm Australia's relationship with any countries," she told ABC Radio National.

Advice about the decision had been provided to Chinese authorities in Canberra and Beijing, Senator Payne said, adding that she did not expect the country to retaliate.

"I hope that if there are any concerns, they will be raised directly with the government," she said.

"But we are not going to move away from our principles, which are about protecting and advocating for sovereignty."

The Morrison government in December granted itself the power under the Foreign Relations Act to veto deals between states and foreign powers that "are not consistent with Australia's foreign policy".

Prime Minister Scott Morrison said his government had simply followed through with its pledge to protect Australia's national interests.

"We can advance our national interests of a free and open Indo-Pacific and a world that seeks a balance in favour of freedom," he told reporters in Canberra.

At a press conference with her New Zealand counterpart Nanaia Mahuta in Wellington, Senator Payne said more state-based agreements will likely be scrapped.

Victoria signed a memorandum of understanding in relation to the Chinese regional infrastructure initiative in 2018 and then signed a "framework agreement" with Beijing in 2019.

Areas of co-operation included increasing participation of Chinese companies in Victoria's infrastructure program. It was not legally binding.

Victorian Employment and Small Business Minister Jaala Pulford said the cancellation of the agreement would not affect work on the state's infrastructure projects.

"The Foreign Relations Act is a matter for the Commonwealth government," she told reporters on Thursday.

Victoria's Opposition Leader Michael O'Brien, who vowed to scrap the "dud deal" if elected in 2022, welcomed the federal government's decision.

He said China gained far more from the Belt and Road Initiative than Victorians.

China in the past 12 months has launched a series of damaging trade strikes against Australia after Mr Morrison called for an independent inquiry into the origins of the COVID-19 pandemic.

The Chinese government also remains furious with Australia over foreign interference and investment laws and a decision to ban Huawei from the country's 5G rollout.

"We're worried about cyber attacks and we're worried, obviously, about state governments that enter into compacts with the Communist Party against our national interests," Defence Minister Peter Dutton told 2GB radio.

"We're not going to allow our policy, our principles, our values to be undermined. We aren't going to be bullied by anyone, we are going to stand up for what we believe in."

Labor's spokeswoman for Foreign Affairs Penny Wong said the federal government must now work to diversify trade and economy.

"Under Scott Morrison's watch, Australia is more trade dependent on China than ever," she said in a statement.

Australian Associated Press