On 12 September 1854 Australia's first steam train began scheduled services on the 4-kilometre track between Flinders Street and Sandridge (Port Melbourne). Built, owned and operated by the Melbourne & Hobson's Bay Railway Co., the new line soon had a steady trade carrying passengers and freight between the port and the town. Melbourne was the gateway for people and goods bound for the prosperous Victorian goldfields.
Melbourne's railway was built to the Irish gauge of 5 ft 3 in (1600 mm). This gauge had been set by the senior colony, New South Wales, where the chief engineer of the Sydney Railway Co. was an Irishman. When a Scot replaced him, New South Wales switched to the English and Scottish gauge of 4 ft 81⁄2 in (1435 mm). But Victoria had already ordered its locomotives and rolling stock and was unable to change. So began Australia's notorious break-of-gauge railway problem.
At first the line was profitable enough to encourage the company to build a branch line to St Kilda. It turned off the Sandridge line soon after it crossed the Yarra River. Another company, the St Kilda & Brighton Railway Co., built a line from St Kilda station to Brighton. It crossed St Kilda Road on a timber overhead bridge, then went via Chapel Street (Windsor), Balaclava, Elsternwick and Bay Street (North Brighton) on its way to Brighton Beach. The line opened progressively in 1859 and 1861. Its trains ran right through to Flinders Street, over Melbourne & Hobson's Bay tracks.
The Windsor-St Kilda section closed in 1862, when the lines of yet another company, the Melbourne & Suburban Railway, reached Windsor via Richmond. The St Kilda & Brighton Railway was never profitable and sold out to the newly formed Melbourne & Hobson's Bay United Railway Co. in 1865.
The Melbourne & Suburban Railway Co. was formed in 1857 and was authorised to build a line from Princes Bridge to Windsor, with a branch from Richmond to Hawthorn. To avoid the cost of bridging the Yarra, it first built only as far as Richmond. Trains first ran on that section in 1859. The company built a branch to George Coppin's pleasure gardens at Cremorne, with an extension to 'Pic-Nic', on the banks of the Yarra. It eventually bridged the Yarra in two places: in 1860 for a line to Windsor via South Yarra, and in 1861 for another to Hawthorn. Another company built a suburban line to Essendon. The Melbourne & Suburban Railway Co. was in deep financial trouble by the time its lines to Hawthorn and Windsor were completed. It sold out to the Melbourne Railway Co. in 1862.
Although the joint-stock, private-enterprise pattern of railway finance was standard in Great Britain, it did not work well in Melbourne. The colony did not have the sort of investors - mainly retired people of means - who bought railway stock. Many promoters of Melbourne's private-enterprise railways had short-term motivations, such as land speculation along the proposed lines. There were many instances of incompetent financial and engineering management.
So, for the next 20 years Melbourne's suburban railway pattern was static. Only when the government-owned Victorian Railways took over all the privately owned lines in the early 1880s was there any significant extension of the Melbourne suburban network. The line from Hawthorn, for instance, was taken right through to Lilydale quite rapidly in the early 1880s.
Because it provided widespread access to suburban estates, Melbourne's network of suburban railways was an important factor in the city's infamous land boom of the late 1880s. Estates often had the word railway in their names, with scant regard to how far they happened to be from the nearest station. The 1880s saw a spate of railway-building in Victoria, much of it originating in Melbourne or Melbourne suburbs, most of it authorised by the notorious Railway Construction Act 1884 when Thomas Bent was minister for railways. The Act, which authorised 66 separate lines - such as the line north from Fitzroy through Preston to Whittlesea - became known as the 'Octopus Act'.
Melbourne's railway system was built to a radial pattern, and this was reflected in the pattern of suburban development. Clusters of businesses and houses grew up around individual railway stations. This pattern continues to be evident in the 21st century, with houses of pre-1950s vintage, often without any provision for cars, clustered within walking distance of railway stations. The Victorian Railways' only attempts to vary this radial pattern, the Inner Circle and Outer Circle lines, failed to attract passengers. In the closer suburbs, the development of cable and later electric trams filled in some of the public transport gaps, but the tram lines also tended to have a radial pattern.
Melbourne became the focus of the government-owned Victorian Railways, which built lines from Spencer Street Station to other parts of Victoria. The line to Geelong opened in 1857, to Ballarat via Geelong in 1862, to Bendigo in 1862, and to Wodonga in 1873. These and other lines based on Spencer Street provided suburban services in Melbourne's west and north. The arrival of the railway at Echuca via Bendigo in 1864 joined Melbourne to the burgeoning riverboat trade along the Murray River. Spencer Street Station became the city terminal of Melbourne's country lines, and then its intercolonial rail services.
Important steps in the development of Melbourne's suburban network were the construction of a cutting under Swanston Street in 1865 to allow eastern-suburbs trains to run through to Flinders Street instead of terminating at Princes Bridge, and the construction of the viaduct between Flinders Street and Spencer Street stations, which passenger trains began to use in 1894. The original entrance to Flinders Street Station was at the end of Elizabeth Street. When the station was extended to Swanston Street in 1906, the famous dome was built, with the main entrance under it.
Major workshops for building and servicing locomotives and rolling stock developed first at Williamstown, then at Newport, where over 500 steam locomotives were built. One major achievement there was the complete construction of the famous streamlined, air-conditioned Spirit of Progress train, which began the Victorian leg of the Melbourne-Sydney services, between Melbourne and Albury, in 1937. At the height of their development, Newport Railway Workshops employed over 3000 people. By the 1990s, with changing technology, and the outsourcing of construction and maintenance work, only 300 people worked there.
Melbourne was the first Australian city to electrify its suburban railway network. Talks on electrification began in 1896, but nothing definite happened until 1907, when Thomas Tait, the chairman of commissioners of the Victorian Railways, engaged English expert Charles Mertz to investigate the subject. The Victorian Government authorised a modified scheme, with Mertz in charge, in 1912. The first electrified line was the 27-kilometre stretch between Essendon and Sandringham, with the first scheduled electric service on 28 May 1919. Electrification of the system proceeded steadily, and was completed when the Heidelberg-Eltham section became electric on 15 April 1923. Melbourne's electrified system was gradually extended: to Upfield in 1959, Lalor in 1959, Belgrave in 1962, Epping in 1964, Pakenham in 1975, Werribee in 1983, Laverton in 1985, Cranbourne in 1995.
The original electric trains had seven wooden cars, some with swing doors and some with sliding doors. Each seven-car set had three motor cars and four trailer cars. Similar trains to these operated the system until the mid-1950s, when the blue Harris-type train was introduced. These were superseded by stainless-steel Japanese Hitachi trains in 1972 and by Comeng stainless-steel trains in 1981.
Serious talk about building an underground railway in Melbourne began in 1929, when the Metropolitan Town Planning Commission recommended a 'northern city railway' to reduce pedestrian congestion around Flinders Street and Princes Bridge stations at peak hours. Talk continued on and off until 1960, when the Victorian Parliament passed the City of Melbourne Underground Railway Construction Act, enabling construction of a proposed loop. But there were financial problems and the proposed loop did not materialise. By the end of the 1970s, plans had been firmed up and finance ensured, and work was well advanced. To provide a loop right around the city, Melbourne's underground railway needed four tunnels for almost the entire length of La Trobe and Spring streets, and three new underground stations: Flagstaff, Museum and Parliament. Together with Flinders Street-Princes Bridge and Spencer Street, they linked Melbourne with nearly 200 suburban stations and beyond. Trains began running on the loop in 1981, when Museum (later renamed Melbourne Central) station opened. The service improved with the opening of Parliament station in 1983 and Flagstaff in 1985.
Each track in the loop was designed to serve a group of suburban railway lines. One track, the Caulfield- Sandringham loop, was for trains that passed through South Yarra station to Dandenong, Frankston and Sandringham. The Burnley loop was for trains that passed through Burnley to the Lilydale, Belgrave, Glen Waverley, and Alamein lines. The Clifton Hill loop was for trains that passed through Clifton Hill to the Epping and Hurstbridge lines. The Northern loop was for trains that passed through North Melbourne to the Broadmeadows, Upfield, St Albans, Altona and Williamstown lines.
In 1999 the Kennett Liberal Government contracted for management of Melbourne's suburban train services to be provided by two private-enterprise companies, Connex and M>Train. In December 2002 M>Train walked away from its contract, and in April 2003 the Bracks Labor Government approved Connex as the single operator for the entire system. In 2002 Connex introduced new Alstom-built Xtrapolis trains, which proved to be popular with commuters.