The Andrews government is considering a $1 billion private bid to build Victoria's second casino on Geelong's waterfront.

Fairfax Media understands that staff at Treasury and the office of Gaming Minister Jane Garrett have begun preliminary work on the proposal by casino developer John Haddad. The move follows recent announcements by state governments in Queensland and NSW of major casino developments to boost tax revenue and stimulate competition with existing operators.

Geelong's fragile economy has been battered in recent years by the closure of several large manufacturers, while its proximity to Avalon airport and tourist attractions such as the Great Ocean Road could also make it a suitable location for a new gambling mecca.

If successful, such a major project could also prove to be politically expedient for the government with the seat of Geelong and at least three surrounding electorates considered to be marginal.

But any plans for a second casino are expected to encounter robust opposition from anti-gaming campaigners and community groups concerned about the social impact of a major gaming venue on a city grappling with recent job losses and pockets of extreme disadvantage.

A spokeswoman for the Gaming Minister said there were no plans for a second casino.

But Fairfax Media understands that Mr Haddad put forward the casino idea through the government's market-led proposal process, which allows the private sector to propose infrastructure projects.

Mr Haddad has been involved in development of a string of Australian casinos including Crown at Melbourne and Wrest Point in Tasmania.
Approached by Fairfax Media Mr Haddad said it was "too early" to discuss any casino scheme he may have. However he said Geelong would be a "superb place for a second Casino".

Fairfax understands Mr Haddad has also had initial discussions with leading Geelong businessman Frank Costa about the casino idea.

While it is unknown what position Crown Resorts would take on the granting of a second casino licence, any attempt to undermine its monopoly position in Victoria potentially puts the Andrews government on a collision course with billionaire owner James Packer.

Premier Andrews has enjoyed a close relationship with the casino baron, after agreeing to honour a deal struck by the former Napthine government last year that extended Crown Melbourne's licence from 2033 until 2050.

In return, Crown would pay an additional $910 million in taxes, including an up-front agreement of $250 million.

While the Napthine government agreed to award 128 extra poker machines and 40 additional gaming tables, it is understood to have refused a request by Crown management for an exclusive licence in Victoria.

Under the original laws introduced in 1991, Victoria was limited to one casino, but a legislative amendment  made last year stated Crown was not eligible to receive compensation or damages if the government granted "one or more casino licenses ... to any person or persons other than the Company (Crown)".

Over the past year, state governments in NSW and Queensland have moved to break up entrenched monopolies by approving second casino operators in Sydney and Brisbane.

In July 2015, the Queensland government rejected a bid by Mr Packer's Crown Resorts and appointed Echo Entertainment to build a $2 billion resort at Brisbane's Queens Wharf precinct.

Premier Annastacia Palaszczuk said the development would kickstart tepid economic growth in the state by creating 3000 construction jobs and about 8000 permanent positions.

Last year, the NSW government approved an unsolicited proposal by Crown Resorts to develop the $2 billion Barangaroo resort on the western edge of Sydney's CBD.

The former O'Farrell government justified the contentious decision on the basis it would promote competition with The Star Sydney Casino, which is owned by Echo Entertainment and opened in 1997.

The current preliminary work for a new gambling mecca in regional Victoria is not the first time a Labor government has considered breaking Crown Melbourne's stranglehold.

Before it was swept from power in 2010, the Brumby government had formed an interdepartmental committee to examine plans for a $400 million casino on the banks of the Murray River in Mildura.

At the time, then gaming minister Tony Robinson said another casino "might actually be a good thing for the state", after repeatedly denying any plans to break Crown's monopoly in Victoria.

Former premier Ted Baillieu rejected the proposal for the "Mildura Jewell" also by Mr Haddad and Mildura businessman Don Carrazza shortly before he claimed power in November 2010.

In 1998, former Premier Jeff Kennett also flagged the possibility of boutique-style casinos at Lakes Entrance, Portland and Mildura, which was slammed by the ALP opposition leader John Brumby at the time.

Reflecting a major switch in ALP policy over the past two decades, Mr Brumby railed against the proposal: "There is no basis to any application unless the tables and machines were provided at the expense of those at Crown," Mr Brumby said.

"Casino culture is not the way ahead for Victoria," Mr Brumby said.

Crown delivered $208 million in tax revenue to the state government in 2013-14. The Southbank venue was budgeted to pay $224.6 million in 2014-15 and $234.1 million this financial year.

On Friday morning, Gaming Minister Jane Garrett said "there are no plans for a casino in Geelong".

"There has been an idea floated by a private operator and he has been referred to the normal processes at the department of treasury and finance."

Ms Garrett said there had been no formal proposal submitted.

"If a second casino was to ever to be built, there would have to be a huge amount of work done, a huge amount of community consultation, none of that is taking place. At this point it just so beyond hypothetical, it is such a thought bubble."

The proposal was also quickly condemned by the Alliance for Gambling Reform who highlighted that Geelong punters had lost $113 million on poker machines last year.

"Putting more pokies into a Geelong Casino would be like inviting more ice dealers to town," alliance spokesman Tim Costello said.

"Surely Geelong has suffered enough. These venues simply add pressure to the most vulnerable in our community. They don't ever help and they cause a lot of hurt."