It comes after several recent incidents and alleged thwarted attempts at attacks on busy areas.
Authorities have warned the public to expect an extra police presence and increased safety measures.
"Attention, this is a test of the CBD Emergency Warning System. The next sound you hear will be the standard emergency warning signal."
That was the sound of Melbourne testing its new emergency loudspeaker system, designed to instruct the public on what to do in case of an unfolding emergency.
The system will only be used for what are termed "'Class Three" emergencies, such as terrorist attacks, sieges, riots or armed offenders.
More than 60 sets of speakers have been installed across the city's central business district out of a total of 90 sites.
Several messages have been prepared for the system, including warnings to the public to stay in place, move elsewhere or take shelter inside nearby buildings.
Victoria Police acting chief commissioner Shane Patton says the alerts are just one of several measures being prepared to guide the public if a crisis occurs.
"It will capture people's attention, which is what this is designed to do. There'll be police on the ground. There'll be other avenues of information going out to explain to people. So we would be really focusing on keeping people calm in an emergency. We don't want panic to occur. And that's why we'll be doing a range of different aspects as well as this system."
He says the introduction of the system is particularly timely ahead of celebrations to mark the New Year.
"We want people to come in, enjoy themselves. It's a family occasion, it's a festive occasion. You should have confidence it's going to be safe in here with the amount of security and police involved. And so, yes, this is another asset to us in the event if something did happen, and, yes, it was important to have this up and running around this time of year."
Sydney, which already has a speaker system in place even though it has not used it yet, will also intensify security measures ahead of New Year's Eve.
Police with Colt M-4 semiautomatic rifles and undercover surveillance teams will flood the city's streets, along with thousands of extra officers.
Armed riot-squad police will be on hand to respond to high-risk situations such as vehicle attacks or mass stabbings.
More than a million people are expected in Sydney to celebrate the arrival of 2018.
The head of the Tourism and Transport Forum, Margy Osmond, says fear of an attack has not stopped Australians from participating in large public gatherings.
But she has also urged people to remain vigilant in large crowds.
"Look, I think you only had to look at the number of people that were out there doing a bit of shopping earlier this week, and still are, to know that Australians are pretty commonsensical about this stuff. They'll be alert, but they won't be changing their behaviours over much and I think they'll get on with life. The issue here, as it must be in future, is always about being vigilant and a bit careful, but I think nothing's going to change the appeal for everybody -- locals and people from overseas -- of spectacular New Year's Eve celebrations in Australia, particularly here in Sydney."
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