Victoria is the first stage to sign up to a federal rail project, creating a direct freight route between Melbourne and Brisbane.

The state signed up on Friday to the Inland Rail project, which will create a direct freight route capable of moving double-stacked containers from product to port in 24 hours, with the first train to operate on the line by 2025.

Now an agreement is reached, $1.7 billion in funds will flow to Victoria to upgrade every regional rail line.

Deputy Prime Minister Michael McCormack said he now looked forward to NSW and Queensland signing on, to begin what is the largest rail project the Commonwealth had been involved in for more than a century.

Mr McCormack said in Melbourne on Friday the project would improve freight travel times for local farmers and producers and once complete, would create thousands of jobs nationwide.

It would also return $16 billion to the national economy during the delivery phase and the first 50 years of operation.

At its peak, the project is expected to generate 2800 Victorian jobs.

State Transport Minister Jacinta Allan said the funds provided to Victoria would be used to upgrade every regional passenger rail line.

“I thank the deputy prime minister for acting quickly, so we can now get on with the job of upgrading track, stations and signalling throughout regional Victoria, to run modern trains and get people home sooner,” Ms Allan said.

In 2017 the Andrews Labor government announced a mammoth overhaul of the state’s regional train lines, as a way of strong-arming the federal government into giving it more money in return for the Port of Melbourne lease.

The federal government previously offered Victoria only $877 million from the asset-recycling fund for the Port of Melbourne lease sale, arguing the state didn’t apply or get approval before the June 30, 2016, deadline.

The funding spat came to an end last June.