Under the 10-year plan, Victoria will also appoint a chief child psychiatrist, a first for Australia, and set up a $1.8 million program to help families traumatised by the bushfires.

A youth mental health expert welcomed the strategy as potentially the biggest step forward since the Kennett government scrapped asylums, but warned that the rest of the plan must be put into effect urgently or Victoria could miss treating a young "potential Martin Bryant" (the Port Arthur gunman).

Premier John Brumby said it was not financially possible to reform the whole mental health system straight away.

The first step will be two pilot projects, one in the Grampians and one in Melbourne's south, that will send mental health workers into the community to spot early signs of mental illness and guide young people to help.

The workers will go into schools, kindergartens, youth centres, GP clinics, hospitals and housing support services in order to make mental health services more accessible.

"One of the key challenges we've got is moving into this space earlier, tackling these issues earlier and focusing more on child and adolescent mental health issues," Mr Brumby said. "Some of the problems, like bipolar (disorder) and schizophrenia, often emerge in late adolescence, and if you are able to tackle those things early, it can just make a fundamental difference to people in later life."

The strategy paper also incorporates a program called Renew, under which experts in post-traumatic stress disorder will work with bushfire victims.

The Government will appoint a chief child psychiatrist to establish new standards for the treatment of mental illness in children.

The strategy will later include:

■A 24-hour mental health advice and referral service similar to Nurse-on-Call, to be running by the end of this year.

■A centralised psychiatric triage system involving police, ambulance officers, mental health teams and hospital emergency departments.

■New alternatives to jail sentences for people with mental health problems in the justice system. Mr Brumby said the rest of the strategy would come "as financial circumstances permit.

"There are some big costs associated with some of these reforms, and, to be honest, we're just not going to be able to do them all today, tomorrow, next week or even next year," he said. "The first step is to get the reform agenda right, and that's focusing on prevention and early intervention."

A professor of youth mental health at Melbourne University, Patrick McGorry, welcomed the strategy as the biggest shake-up in mental health in more than 15 years.

"Victoria's mental health system was slipping backwards," he said. Only a third of young people with serious mental illness were getting access to proper care.

"We are turning away 1500 people a year (from Orygen Youth Health, of which he is clinical director), and hundreds more aren't even getting to us," he said. "We recently saw a young man who was a potential Martin Bryant. He came in with fantasies of committing a school shooting. (With treatment) he improved dramatically and the fantasies faded away."

Professor McGorry said that in the current patchy system, the man could easily have slipped through the cracks. "He could have been turned away if he hadn't disclosed his fantasies. It was lucky. He would have been a potential tragedy in the making."

He said the new strategy was the best he had seen in 25 years.