The planned 11-kilometre route will see trams cross the lake over the Commonwealth Avenue bridge, travel through the Parliamentary Triangle, and down Adelaide Avenue to the Woden town centre.

The route, at this stage, will not extend to Mawson, despite it being included in the south-side stage two proposal little more than a month ago.

It is being dubbed the "north-south spine", a long light rail network stretching from Gungahlin to Woden, which will integrate with rapid and local buses, later tram stages, and other transport options to service the rest of the city.

Building from the City to Woden is expected to cost roughly the same as the Gungahlin to the city, given both travel similar distances, although no detailed costing work has yet been done and a business case is not yet complete.

The government has consulted and conducted pre-feasibility studies on stage two, but says a business case will not be ready until next term.

Cabinet agreed to the Woden route this week, and ACT Labor and the Greens will on Friday make election pledges to sign the contracts during the next term of government.

The path south is not without its challenges.

Moving light rail over the lake via Commonwealth Avenue can be accommodated, but the bridge may require strengthening work, and will at least require comprehensive structural assessments.

It will also require the approval of the federal planning authority, the National Capital Authority, for the portion of the route that travels through the Parliamentary Triangle.

The NCA has already signalled that overhead lines should not be used through the triangle, and Labor, if re-elected, would quickly begin talks with the authority to address concerns it may have.

The announcement pushes the other three options – city to the airport, city to Belconnen, or city around the Parliamentary Triangle – further into the future, although the government retains them in its long-term plans for the network.

The Woden route provides significant benefits.

It will run past a high number of residential suburbs, heavily populated, including in the Murrumbidgee electorate, which is likely to be one of two crucial seats for Labor in October's election.

The project will improve land values along a number of population corridors, and should reinvigorate the Woden town centre and Mawson, which will also soon be boosted by the arrival of 1000 ACT public servants.

The route services national land and federal public service buildings, giving the ACT government a better bargaining position when it asks the federal government to continue funding the project in its second stage.

Labor hopes that Prime Minister Malcolm Turnbull's generally supportive position on public transport and transformative infrastructure may help convince the federal government to open its wallet, if he is still in power.

Friday's announcement is only that cabinet has agreed to choose the Woden option, and comprehensive planning and analysis is yet to follow.

It remains unclear whether work would start immediately following the completion of stage one in 2018-19, although the government is keen to ensure there is minimal delay between the stages to ensure its employment pipeline continues.

Chief Minister Andrew Barr said in a statement that ACT Labor would immediately start work developing this route, "with construction contracts signed in the next term of government".

"We are delivering our 2012 election commitment exactly as we said we would, with work under way now and light rail to be completed in 2018."

"Extending light rail to Woden will create a north-south spine for our public transport network and critically, it will get light rail across the lake."

"Buses, bikes, and walking routes and later stages of light rail will feed into this spine, making it even easier for Canberrans to get where they need to go."

The move was welcomed by the Australian Railway Association, the peak body for passenger, freight and light rail.

"This next stage will generate urban renewal, create jobs and see a renewal of Woden town centre," chief executive officer Danny Broad said.

"Light Rail from Woden to the city will ease congestion and is friendlier to the environment."