Melbourne's East West Link will reduce traffic congestion by about a third on a key access route into the city, the Victorian government has claimed.

Premier Denis Napthine and Transport and Roads Minister Terry Mulder have revealed plans for a $108 million dollar investment in Melbourne’s public transport system as part of the east-west project.

The new package would include $29 million in improvements to tram routes, the $32 million urban renewal of Alexandra Parade – which would feature a new bike path – and a $47 million upgrade to the Doncaster Area Rapid Transit (DART) system.

“These significant improvements in public transport can only be delivered through the building of the East West Link, stage one,” Dr Napthine said.

The premier said Melbourne’s north-south tram routes were constantly held up by traffic congestion and claimed the construction of the east-west tunnel would achieve a 30 per cent reduction in traffic on Alexandra Parade, a key access point into Melbourne’s city centre.

“You can have win-win outcomes. A win for road traffic and a win for transport,” he said.

Transport MP Terry Mulder said the government would seek discussions with local council in relation to improving traffic along Victoria Parade.

Mr Mulder also highlighted that cyclists would benefit from the changes to roads, pledging the creation of a dedicated bus lane on Hoddle Street which he said would not come at the cost of a car lane.

“Across the board it just goes to demonstrate that this East West Link project is also significantly about improving public transport and improving cycling amenity as well.”