The ACT government has given its strongest indication yet of a preference for the light rail line to extend to Russell, with Minister Simon Corbell describing it as "enormously attractive" on Tuesday.
Facing criticism about the project from the Liberal opposition during a budget debate in the Legislative Assembly, Mr Corbell said the proposed extension would help boost business in the city and liberate public servants exiled in the Defence precinct at Russell.
The 3.2-kilometre extension would run from the planned terminus at Northbourne Avenue and Alinga Street, around London Circuit and down the upgraded Constitution Avenue. It would include three passenger stops and could create about 5600 extra passenger trips each day, providing a boost of 30 per cent to the overall project.
Two consortiums bidding to build and operate the city-to-Gungahlin line have been asked to provide costings for the Russell arm after they hand their bids for the first 12 kilometres to the government at the end of September.
Further information relating to the Russell extension is due in October and contract negotiations will take place in the first half of 2016.
"What an enormously attractive option this would be if it can be realised," Mr Corbell said.
"Thousands and thousands of public servants – isolated in Russell right now, where they cannot connect to the city centre easily and effectively, even during their lunch hour.
"So let's look at the opportunity that comes from connecting them now."
The government believes trams could service about 8300 public servants and Defence Force personnel as well as city office workers, tourists and shoppers. The extension would also service new housing developments in Reid, the convention centre and Canberra Institute of Technology.
Mr Corbell said city business owners were "backing in" the extension proposal, but the government won't sign off until it considers final costs.
"They understand the economic opportunity that comes from accessible, regular, frequent public transport connections between Russell and the city.
"The government is very keen to see this option closely examined and that's why we have asked for it to be part of the bids for stage one."
The current Constitution Avenue upgrades allow for realignment for a light rail line. Disruption around City Walk and Vernon Circle would be avoided using the London Circuit route.
Any extension will see the $783 million project cost and annual payments to private partners increase, likely to be a flash point for the opposition.
Speaker Vicki Dunne again criticised the project, despite her previous public support for sustainable transport and reduced car dependency in Canberra. Mrs Dunne read critical comments from her Facebook page opposing the government's city-to-Gungahlin proposal.
Mr Corbell quoted at length from a 2003 paper written by Mrs Dunne that said commuting patterns could shift with a light rail system, already in place in similar cities overseas.
Opposition Leader Jeremy Hanson accused the government of "reckless determination" over its plans to sign contracts before the October 2016 election.
"They know that if they take this to the election in its current form, they're going lose.
"That's why they think that 'if we get these contracts signed, then that will hopefully take it all off the table'. But it won't," Mr Hanson said.