Two short sections of underground track added to the City Loop could provide the equivalent of a 10-lane freeway through the heart of the city, an influential transport group says.

The Rail Futures Institute says in a new report that while it is good the state government is putting major funding into transport works like the $11 billion Metro Tunnel, these projects "are mostly 'catch-up' investments" that don't keep pace with Melbourne’s growth.

The Rail Futures Institute has developed a radical plan for the City Loop. Credit:Wayne Taylor

In a 30-year plan for Melbourne's rail, tram and bus networks to be released on Monday, the institute proposes a $120 billion spend for public transport, including a range of fixes and new routes. The report warns that the massive population boom on Melbourne's urban fringe is perpetuating car-dependent, low-density detached housing that is too far from local employment.

"Most new outer urban growth is occurring in areas without adequate or planned provision of public transport," the report warns. "Without change in policy direction, the growth of car-based, outer urban development will further isolate the 1.5 million new residents from employment opportunities and access to services condemning them to ongoing car dependency on increasingly congested roads."