Speeds will drop to 30km/h on residential streets in Collingwood and Fitzroy from September in a move believed to be an Australian first.

It is understood that this will serve as a test case and the new speed limit could be proposed for other areas in Melbourne if the trial is successful.

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Within weeks, Victoria Police will fine motorists who break the new speed limit, which will apply to eight kilometres of local roads bound by Alexandra Parade and Hoddle, Johnston and Nicholson streets.

The new speed zone (which will not apply to Smith and Brunswick streets) will be a 12-month trial led by Yarra Council, backed by a $250,000 grant from the Transport Accident Commission. The area is currently a 40km/h zone.

Yarra mayor Daniel Nguyen said he wanted to make it safer for pedestrians and cyclists on the area's smaller roads, which are often used by motorists travelling between the outer suburbs and the city.

One hundred crashes occurred within the new speed zone between 2012 and 2017. More than 90 per cent of the crashes involved pedestrians, cyclists and motorcyclists.

"We're looking at seeing if the trial will change driver behaviour and whether pedestrians and cyclists can reclaim the streets a little bit," said Cr Nguyen.

"The study area has schools, kindergartens, there are a lot of young people moving in the area, we want to go back to a day where people could actively use their streets and feel safe having your kids walking to school.”

Research shows that the chance of a pedestrian dying when hit by a car drops by more than half when speeds are reduced from 40km/h to 30km/h.

The World Health Organisation found that lowering a speed limit by just 1km/h would lead to a 2–3 per cent reduction in road crashes.

But the RACV's mobility advocacy manager Dave Jones said the move was a waste of money, as average speeds on many of the streets were already close to 30km/h.

"We think the TAC’s funding would be better spent on making high speed country roads safer, or providing separated bicycle lanes and paths along busy arterial roads," said Mr Jones.

The motoring body backs 40km/h zones on a "case by case basis".

Sam Luck, principal of Collingwood College's primary school said the new speed would help protect more than 80 per cent of students who ride, walk or take public transport to school.

Just this year, two staff members were "knocked off" their bikes and students had "close calls" with motorists, who choose to drive on roads surrounding the school's entrance to avoid Hoddle Street.

"If the cars go slower it will mean that if there are any accidents, the risk of the kids getting hurt will be severely reduced," Mr Luck said.

Monash University Accident Research Centre Associate Professor Jennie Oxley, who will monitor the 12-month trial with Yarra Council and VicRoads, said researchers would recommend that the speed zone be rolled out more widely — especially in areas with a large number of schools — if the Yarra trial was a success.

"The evidence is very clear worldwide, that if we can reduce vehicle speeds to low levels ... it has safety benefits for the community," she said.

Dr Oxley said lowering the speeds would have a "negligible" impact on journey times.

"People are motivated to drive fast because they're in a hurry ... but humans have a very poor risk perception," she said. "We over-estimate what a safe speed is, there is evidence suggesting that if others are driving fast around us, we drive fast as well."

VicRoads is investigating the benefits of 30km/h speed limits in trials on local roads as part of the state's Towards Zero road safety campaign.

VicRoads' Safe System Road Infrastructure Program director Bryan Sherritt said it was one of hundreds of road safety initiatives funded through the $1.4 billion Towards Zero action plan, "which aims to ensure no one is killed or seriously injured on Victorian roads."

TAC Road Safety lead director Samantha Cockfield said local government road initiatives were “critical” to the success of the Towards Zero campaign.