Thousands of new homes will be built on former defence land in Melbourne that Labor says could be contaminated.
The federal government has released 128 hectares of former defence land in Maribyrnong so it can be used to build affordable housing.
The government predicts up to 6000 homes can be built on the site of the old Maribyrnong munitions factory which operated during World War I.
"It's a very prominent site in suburban Melbourne," Defence Minister Marise Payne told reporters on Sunday.
Treasurer Scott Morrison said releasing defence land for urban development is proof of his budget's affordable housing plan in action.
"This is where the budget gets real," he told reporters gathered at the defence site.
Mr Morrison said the former defence site will be available for private housing and social housing.
The site's development will be guided by good planning in partnership with local councils and the state government, he said.
But Opposition Leader Bill Shorten says the federal government has bypassed state planning authorities in its decision to release the Maribyrnong defence site.
"The problem is this land is greatly contaminated," he told reporters.
"The residents want to be satisfied the area is going to be cleaned up, and that is not a small procedure."
The state Labor government says the federal government has already told them it does not want to work with Victoria and will privately develop the Maribyrnong site themselves, Mr Shorten said.
"The federal government ... has decided to bypass the state government and relevant planning authorities and they're just going to do a big privatisation of this land for the highest dollar," he said.
"If you plonk 6000 houses, or about 15,000 people in the middle of existing suburbs - you guarantee gridlock."
The Labor leader said he did not trust the government "to do anything right at the moment".