Boreholes will be dug along the nine-kilometre alignment of the $11 billion tunnel between South Kensington and South Yarra and work will continue until early next year.

Drilling began on the corner of Swanston and Victoria streets opposite the Melbourne City Baths on Wednesday.

Public Transport Minister Jacinta Allan warned there would be disruption for city residents, traders and visitors but said the work would pinpoint the tunnel's eventual alignment.

"There will be work done on footpaths, in gardens and in the centre of roads, that is about making sure the Melbourne Metro Rail Authority captures the best possible data," Ms Allan said.

The blue and yellow dots show where the boreholes will be dug during the next few months.

The government also confirmed that an environment effects statement would be undertaken as part of the project, bucking the trend of recent major transport projects in Victoria, where this planning step has been bypassed.

Neither the $3.65 billion Regional Rail Link nor the cancelled East West Link included an environment effects statement.

However, the matter of how the hugely expensive tunnel would be paid for remained unconfirmed, with Ms Allan only saying she was "optimistic that a federal government in the future will see enormous value in this project".

The Andrews government hopes the Commonwealth will contribute one-third of the estimated $11 billion project cost but this has been ruled out by the Abbott government, which is, instead, considering making a contribution to the Western Distributor toll road proposal.

Opposition attorney-general John Pesutto said the government still needed $10 billion to complete the project. "This is an unfunded project," he said.

Lord mayor Robert Doyle was effusive about the rail tunnel, saying it "will set our city up for the next 50 to 100 years", but also rejected the notion that the city or its ratepayers should contribute.

"I'd be delighted if anybody kicked in money to make the project a reality but don't ask us please," Cr Doyle said.

A property levy recently helped pay for the £14.8 billion ($A29.2 billion) Crossrail tunnel in London.

"I know they did it in London but there is a world of difference in one of the world's financial centres and the value of property rises around stations and the project here in Melbourne," Cr Doyle said.

However, he said the city would struggle to cope in future without greater public transport capacity.

"We're going to have very soon a million people a day coming into the city; they can't come in by car, that's why this project is so crucial to the economy of the city," he said.

With Benjamin Preiss