Melbourne City Council planners will investigate closing parts of Spencer Street at the "dangerous" Southern Cross Station intersection.

The council will spend $750,000 on a master plan to improve pedestrian safety at the busy junction of Collins and Spencer streets, where young barista Josie Edden was killed last year after falling into the path of a garbage truck.

Lord mayor Robert Doyle said Town Hall was already working with Metro Trains to reopen a historic pedestrian tunnel that runs from the station, underneath Spencer Street, to Little Collins Street.

"I think that would be a great thing to do, to use a piece of infrastructure like that to move people into the city without them risking that intersection," Cr Doyle said.