Sydney has announced plans to build a multi-million dollar stadium on the harbour's edge, with hopes of winning the Grand Slam tournament from 2016 when the contract with Melbourne as host expires.

''I think the Australian Open is clearly a terrific annual event and it's something that any events company would be mad not to have on their radar,'' Events NSW chief executive Geoff Parmenter said yesterday.

''That said, it's locked into Melbourne until at least 2016,'' he said.

''It's very early days. And while we've had some discussions with Tennis Australia, there's nothing formal [arranged].''

Glebe Island, near Sydney's Darling Harbour and Anzac Bridge, was one of the sites considered for the stadium, he said.

The NSW Government is keen to reinvigorate tourism in the nation's most populous city following a cooling in tourist numbers after the 2000 Sydney Olympics.

But Victoria's Premier John Brumby has vowed he will fight to keep the Open in Melbourne after the current contract expires.

''It's a great stadium, the players love Melbourne, we've got the best sports precinct in the world and I don't think we need to take too seriously the threats that are coming from Sydney,'' Mr Brumby said yesterday.

''I met last week with Geoff Pollard, the president of Tennis Australia, and we have an excellent relationship with Tennis Australia, we have a fantastic facility.

''We're working with them to make some improvements and we'll be making some announcements about that next year.''

Even the NSW Opposition says plans to bring the Open to Sydney are only a dream and should remain so while the government struggles with infrastructure spending.

''[NSW Premier] Nathan Rees has to justify how he will spend hundreds of millions of dollars on a new tennis centre, yet not commit to spending the same on long-promised hospital, road and rail projects,'' Mr O'Farrell said in Sydney.

''We need to spend money to ensure people can move around this city whether on business or to get to a sporting event.''

Mr O'Farrell did not rule out possible future bids to attract the event to NSW.

''Having the Australian tennis championship is a great dream, but it will remain a dream as long as this state government can't commit to basic infrastructure required for this city to work,'' he said.

AAP