Metro Trains and Yarra Trams have been given the green light to run Melbourne's train and tram networks for another seven years, provided they accept a series of tougher performance targets.

The Andrews government has chosen to reward the two incumbent public transport operators for their performance running the city's trains and trams during the past eight years, by offering them the right to bid for a seven-year contract extension, to the exclusion of other would-be competitors.

Metro is contracted to keep Melbourne's rail network in good condition. 13th September 2016. Credit:Jason South

But it has also sought to address widespread public dissatisfaction with the system's unreliability, by proposing more stringent punctuality targets that give greater weight to on-time running during the peak.

Currently, flat monthly targets for compensation do not distinguish between the peak, when most passengers are travelling and it is more challenging to run an on-time service, and the quieter off-peak when it is relatively easy to run a reliable service.