The City of Melbourne has a clear priority to make the City pedestrian friendly, following the advice of Danish architect Jan Gehl. Wikipedia states that Prof Gehl's "career has focused on improving the quality of urban life by re-orienting city design towards the pedestrian and cyclist". The City has embraced his advice in relation to pedestrians and high quality public spaces, by widening footpaths, creating spaces such as the City Square and Federation Square. Space has also been found for trams, with the superstops and by keeping cars out of the tram tracks more effectively. Melbourne is much more enjoyable, livable City now than 20 years ago as a result, and whereas the City used to become empty after business hours, it is now full of people all day and night, all days of the week.
Progress on "re-orienting city design towards the ... cyclist" has been less effective. Some progress has been made but only a fraction of what could and should be achieved. The best example of a transfer of space to cyclists is the high quality on-road lanes in Queensbury Street. A whole lane of traffic was removed and converted to a wide bike lane with a good buffer zone. Recently the City added a "tactile" vibra-line to the edge of the demarkation line, to alert cars that stray into the buffer zone. Queensbury St is a wide street that does not connect directly to the City and starts and ends within the City, so it doesn't connect directly to the main arterial routes into the City. For that reason, the space was a "soft target" for transfer to bicycles. In a similar way, the north Swanston St bike lanes became easier to achieve because the partial closure of Swanston St south reduced motor traffic in the rest of the street significantly.
Where the harder decisions need to be made, the bicycle has mostly not fared as well in the City's decisions. The Albert St lanes were compromised ironically not because of motor traffic but because local residents didn't want to lose 35cm of grass from each side of the median strip.
So, most of the easy gains have been made. To achieve a big enough share of the transport task to really make a difference will require the hard decisions to transfer significant space from cars to bicycles. The biggest obstacle to this is the State Government through VicRoads, exemplified by the Labor Party minister for roads when he rubbished the City's plans to improve the St Kilda Rd bike lanes by saying "My job … is to fix congestion, not to cause it". The fact is that the narrow, inadequate bicycle lane in St Kilda road carries as many people in peak hour as a much wider car lane, so proving that more bike lanes will reduce congestion, not increase it.
See article on Copenhagenize blog: Cyclists are better shoppers than motorists giving reasons why retailers should be enthusiastic about encouraging more trips by bicycle.
State Government Priorities: Infrastructure Australia shopping list.
Melbourne gains 'bike city' status, The Age, July 22, 2011