BIA chief executive officer Lindsay Grenfell said building an island in the north of the
bay, at an existing spoil ground site, was the perfect use for the 34 million cubic metres of spoil that the channel deepening would generate.
He said the spoil ground was south of Williamstown, midway between Werribee South and Beaumaris, making the proposed island a half hour run from several points around the bay.
"We are not saying whether the channel deepening should proceed - that is a decision for the Supplementary Environmental Effect Statement process - but we are saying the spoil should be put to good use if it does proceed," he said.
"The island would provide a safe mooring, a destination for boats and ferries and a magical vantage point for looking back on the city, especially at sunset.
"It's a win-win-win situation - for the environment and the Victorian economy, for boating as a safe haven and a destination, and for tourism to attract international guests as well as interstate and intrastate visitors.
"We are proposing an eco-island that could combine a wildlife reserve with a tourist hotel, visitors' centre and hospitality facilities."
Mr Grenfell said the island would address one of the major environmental concerns because it would confine the dredging spoil in a small area to stop contaminated material spreading through the bay.
He said the BIA and others had been talking for well over a decade about building the island in the bay, and the prospect of spoil from channel deepening now made it viable.
"It is an idea whose time has come," he said. "The whole marine community supports this idea - 155,000 Victorian boat owners, the Coast Guard, Yachting Victoria, VRfish, virtually every boating and fishing club in the state.
"With 34 million cubic metres of spoil we could have a very handsome island.
"It is a vastly better option than dumping the spoil a metre deep over 34 million square metres of the bay."