State and national leaders of the Australian Workers Union are the latest to raise concerns about the China-Australia Free Trade Agreement (ChAFTA), which they say loosens restrictions for Chinese-owned companies to fly in foreign labour on 457 visas.

In a letter to the prime minister, the AWU calls for assurances that building giant John Holland will have to hire Australians "whenever possible" to work on the Victorian government's $6 billion infrastructure project to remove level crossings, despite the company being recently acquired by China Communications.

The letter coincides with a national union campaign, including prime-time TV ads, claiming that the trade deal removes the need to hire local workers first on infrastructure projects valued at more than $150 million.

The Abbott government has strongly rejected the claims as baseless, claiming multiple requirements and safeguards that ensure Australians continue to receive first opportunity in the recruitment process are in place.

John Holland has been awarded $500 million in contracts for the Andrews government's level-crossing removal project, and will be subject to the China free trade deal due to its new ownership.

AWU national secretary Scott McDine and state secretary Ben Davis said they were deeply concerned that the state government's hopes for the project to provide a major Victorians jobs boost could be dashed.

"When Victorian taxpayer money is used to build Victorian infrastructure, it should be Victorian workers who benefit from the construction jobs created, not Chinese workers," the letter says.

"Yet because of the ChAFTA your government negotiated, there is absolutely no guarantee that they will get access to this work."

Assistant Immigration Minister Michaelia Cash said the union was leading a scare campaign and its claims were debunked by guidelines that continue to require companies to demonstrate labour market need before hiring visa workers.

"On the contrary, this historic agreement presents enormous opportunities in a wide range of industries which will stimulate job creation," she said.

The Andrews government said it would do "everything in its power" to ensure Australian workers were given jobs on the project to remove the state's 50 worst level crossings, and urged the Abbott government to do the same.

The spokeswoman said John Holland had been required to commit to at least 93 per cent local content – including materials and services – when it tendered for the level crossings removals in Glen Iris, Bentleigh, McKinnon and Ormond.

"Procurement is currently underway and the project is on track to meet this target," she said.

"Jobs created from the Victorian taxpayer investment should benefit Victorian workers."