Jeff Kennett, the former Victoria Premier, believes that the State Government will end its involvement with the Australian Grand Prix when the current contract expires, after the 2010 event.

Mr Kennet, who played a major role in snatching the race from Adelaide, believes the Victoria government cannot continue pouring money into an event which is showing significant year-on-year losses, which are ultimately borne by the tax payer.

"I do believe that the Labor Government are preparing to end Melbourne's involvement with the Grand Prix after this current contract finishes," he Southern Cross Broadcasting. "My bet will be that the Labor Government will renege on this contract in 2010."

His claim comes the day after the Victoria parliament revealed that the 2007 event in Melbourne saw a loss of $34.6m (£15.4m), a considerable increase on the $21m (£8.2m) loss in 2006 and the $13m (£5.1m) in 2005.

"I understand the auditor-general's concerns about costs," said Kennett, "but it is only one part of the ledger. And it's not to say that governments can't try and reduce that cost."

However, it wasn't all doom and gloom from the former Premier, for Kennet believes the situation would improve should the event be moved from its current location to Sandown raceway, in Melbourne's south-east, which might reduce costs. He admitted that losing the Grand Prix would damage Melbourne's reputation as a world player when it comes to hosting international events.

"My greatest worry is that this state has a reputation built up correctly of being the sporting capital of the world," he said. "And, if we want to start damaging our brand, then start losing your international events.

"I don't consider this to be an expenditure on a motor race alone," he added. "It is an expenditure on a positioning that helps develop and maintain the Melbourne brand."

However, Premier John Brumby told ABC Radio that the State Government will review its position on the race next year.

"I have set two tests," said Brumby. "It's got to be a good event for the state. And it's like anything we do, it's got to represent good value for money.

"So that's the test and we will be examining these things in much more detail next year."