Canberra Business Chamber CEO Robyn Hendry said she could see the logic in the "north-south spine", but was not sure why it was prioritised over a link to Russell and the airport.

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.

"I can see why two major population areas have been joined and how it will create energy in the city from both of these areas as well as the positive impact it [will] have for Woden, as moving public servants back might not be enough to revitalise the area," Ms Hendry said.

"But it is a bit surprising. There has been much talk about phase two involving Russell and the airport, with the large number of people working in Russell and the severely isolated area and of course linking the airport will boost our visitor economy."

Opposition transport spokesman Alistair Coe said the extension was "completely uncosted" and would push the ACT into dangerous, unchartered financial waters.

We know there will be significant problems getting a tram over Commonwealth Avenue Bridge which is likely to blow out costs," he said.

"Secondly, like the initial stage, very few people will live within walking distance of stage two."

But the news was less surprising to the manager of Woden's Mokambo Caffe, Josh Gill, who said it was only fair given that stage one benefited north-siders.

"I think Woden is in dire need of it," he said. "Most people find it quite tired and the revamp shows the forward thinking and progression and that will certainly benefit everyone, especially when linked with the Gungahlin route."

Late last year, the ACT government announced plans for 1100 local public servants to be relocated to Woden in a bid to boost the local economy.

But Woden's Cock and Crown Mens Barber owner Tim Kinsela was deeply concerned the boost would not do enough to repair the damage done by the exodus of federal departments in recent years, adding that the light rail could come too late to save the struggling town centre.

"I've seen five or six cafes close around here this year and we are still waiting for most of the public servants to arrive," he said.

"The light rail will be great news, but so many people here are really worried even about the short-term future and might not survive while they wait years for the light rail."

Heart Foundation ACT CEO Tony Stubbs said the extension "made perfect sense from a community perspective", by linking a number of employment and residential hubs and encouraging walking and public transport.