Premier Daniel Andrews has announced the funding for the loop, billing it the biggest public transport project in Australia.

The funding is for stage one of the project, due to start in 2022, with six new stations to be built in Melbourne's south-east and east.

The project will link all of Melbourne's suburban rail lines and the government said it will create 800 jobs initially.

Mr Andrews and Transport Infrastructure Minister Jacinta Allan are fronting a media conference in Melbourne on Monday ahead of the November 24 state budget.

It follows Sunday's announcement of a $5.3 billion package to build 12,000 social housing homes across Melbourne and regional Victoria, which has been hailed for its health and economic potential.

That package will deliver 9300 new homes and replace 1100 existing public housing units.

Victorian Council of Social Service chief Emma King said the program, tipped to boost Victoria's social housing supply by 10 per cent in four years, would be a "massive leap" toward solving the state's housing and homelessness crisis.

"This colossal investment will mean fewer people cold, hungry and homeless, and more people in work," Ms King said in a statement.

Cohealth, a community health group that works with the homeless in inner-city Melbourne, said the package would improve the health of thousands of Victorians.

"So many of the health problems that we see are prevented through having safe, secure, affordable homes," chief executive Nicole Bartholomeusz said.

Mr Andrews said the program would also create about 10,000 jobs a year over the next four years, with the first six tenders out this month and the first 6000 dwellings expected to be completed within 18 months.

Business Council chief executive Jennifer Westacott said the state government was making the right call to open up the coffers.

"Victoria urgently needs new jobs to fuel the recovery after a long and drawn out economy-crippling shutdown, this is a good start," she said.

"For thousands of Victorians finally able to get back to work this will be welcome news."

PowerHousing Australia, which represents 35 of Australia's largest community housing providers, said the move will reinvigorate business in purpose-built social and affordable housing.

"The timing of this announcement is about right, as even before COVID, housing supply was already sliding down its deepest activity decline in residential housing starts in history," chief executive Nicholas Proud said.

"This will put a stop to that in Victoria to create this new pipeline from early 2021 to underpin those jobs."

Australian Associated Press