New Vic station would cause 'chaos': govt

The Victorian government's $11 billion Melbourne Metro Rail project won't include a new station at a busy inner suburb because it would cost too much and destroy more than 100 properties.

Public Transport Minister Jacinta Allan says an underground railway station at South Yarra would cost up to $1 billion and require acquisition of more than 100 homes and businesses, including half of the Jam Factory.

A Melbourne Metro Rail Authority assessment also found the case for including the station was "very poor".

It would return about 20 to 33 cents for every dollar invested.

Melbourne Metro Rail will include construction of two nine-kilometre rail tunnels from South Kensington to South Yarra, starting in 2018.

The busy Cranbourne-Pakenham line will be removed from South Yarra Station as part of the plan, enabling other services to run more frequently.

Ms Allan says construction chaos linked to building a new station at South Yarra wouldn't compare with the little benefit it would provide commuters.

"A billion dollars would be better spent improving services across the metropolitan and regional train network," she said in a statement on Friday.