Rail emerges as Victorian election issue (AAP)

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Does Melbourne need a railway station in an inner-city development precinct or in a hospitals and universities precinct?

That's one of the things Victorian voters will have to consider come November.

If it wins, Labor won't proceed with the multi-billion dollar Melbourne Rail Link outlined in Tuesday's state budget, which it says puts a railway station in a development site at the expense of a planned station for the Parkville hospital and university precinct.

Opposition Leader Daniel Andrews said people want improvements but not on the "never-never" and not in places where people don't live.

"To build stations where no one lives at the expense of stations where hundreds of thousands of Victorians come to work and visit every single day does nothing to improve public transport," he told reporters on Wednesday.

But the government says Parkville is already well serviced by trams and a station at Fishermans Bend is needed to accommodate the 40,000 residents expected to eventually live there.

Its major rail infrastructure overhaul includes tunnels, increased capacity and three new stations - including one in Port Melbourne where Fishermans Bend is set to be transformed into a modern city over the next 50 years.

Planning Minister Matthew Guy says Fishermans Bend is the largest urban renewal project in Australia, it is ready to go and it must have a railway station.

"A heavy rail station in the Montague precinct, near the intersection of Montague Street and the 109 tram, is the most important piece of infrastructure that can be put into Fishermans Bend urban renewal project to make it sustainable," Mr Guy said.

Mr Guy said infrastructure had to be in place before residents arrived en masse.

"The Montague precinct will be the most intense in terms of development of population throughout the Fishermans Bend urban renewal area so to put a railway station right in the middle of it is the most sensible straightforward thing to do," he said.

Mr Andrews said Labor will focus on its version of the metropolitan rail project, which involves a doubling of the city loop, and will allocate $300 million in the 2015/16 state budget for planning.

"Labor will build Melbourne metro, we'll do it once and we'll do it properly," he said.

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