The Australian GP will remain at the Albert Park circuit as long as the state of Victoria continues to stage the race, according to state government officials.
The announcement scotches recent reports that the race could be moved outside Melbourne city to a purpose-built track in Avalon.
The government's Major Events Minister Louise Asher said moving the race from Albert Park to a dedicated track would cost AUS$300 million ($317 million), according to the Australian Grand Prix Corporation organisers.
"The grand prix is going to stay at Albert Park," she told a parliamentary budget hearing.
"One of the reasons the branding of Melbourne has been so successful is that the Grand Prix is at Albert Park."
Asher said the new conservative state coalition will push Formula One ringmaster Bernie Ecclestone hard when the negotiations for a new contract begin in late 2013 or early 2014.
"When we come to negotiate we will play hardball," she said.
Asher said the current contract, which was signed by the previous Labor state government and expires in 2015, was not delivering the best deal for Victoria's taxpayers.
She said it was not a contract a coalition government would have signed. "The contract that the previous government signed is an expensive contract," she said.
"I think taxpayers could get a better deal if the contract had less in it for my good friend Mr Ecclestone and more in it for Victorian taxpayers.
Asher said she would release the cost to the state's taxpayers from this year's race in the next few months.
Last year, taxpayers poured a record AUS$49 million ($51 million) into the Australian Grand Prix.
