MELBOURNE container terminals will be expanded to accommodate expected trade growth, announced by Victoria state Premier Ted Baillieu.

The project involves the construction of a new container terminal at Webb Dock and the improvement and modernisation of infrastructure and facilities at Melbourne's existing container terminals on the Swanson Dock under the A$1.2 billion (US$1.24 billion) redevelopment plan.

In its 2010-11 fiscal year, Melbourne handled a record 2.5 million TEU. Premier Bailleu said the work was needed to ensure that the port was able to upgrade efficiency as a gateway port.

"With container movements in and out of Melbourne increasing in excess of six per cent every year and tipped to reach eight million TEU by 2035, this announcement is an important part of the coalition government's plan to provide the infrastructure required to meet demand," the premier said.