A new site on Birralee Road, a bush block 5.2 kilometres from the Westbury post office, was announced by Premier Peter Gutwein and Attorney-General Elise Archer on Thursday.

The previous site was 2.1km from the post office.

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The Westbury siting prompted the formation of an anti-prison lobby group, Westbury Residents Against the Prison and several rallies were held.

WRAP president Linda Poulton is yet to respond to the proposed new site saying the group was yet to meet.

Mr Gutwein said the government had listened carefully to the community.

"We heard the concerns that were being raised," he said.

"Do I think there will be 100 per cent support for this, probably not. Do I think it will satisfy the vast majority in the Meander Valley municipality, yes I do."

Mr Gutwein denied that political considerations in Lyons, where the Liberals hold three of the five seats, influenced the decision.

Ms Archer said a Social and Economic Impact Study the project would support more than 1000 jobs and deliver a $500 million economic boost to the region.

A key part of the SEIS was a telephone survey of people in the 7303 postcode and a mail-out survey of 8581 Meander Valley residents.

"A clear theme reiterated by the community was that building the prison at a site further away from the town of Westbury would be preferable," Ms Archer said.

The 2226 mailout respondents found 50.3 per cent supporting with 36.5 per cent opposing and 13.2 per cent neutral.

But the telephone survey of 333 residents found 39.1 per cent support and 43.9 per cent opposing with 17 per cent neutral.

Mr Gutwein said that the new site was identified after he met Westbury residents in February.

Ms Archer said the government had every intention of building on the 70 hectare Crown Land site - of which a 15ha footprint is required.

"We will now undertake further due diligence over coming weeks, as well as talking to local landholders and engaging the local community," she said.

She said the area would need to be rezoned and then a development application submitted to the Meander Valley Council.

Ms Archer said the supply of services such as gas and water would cause an increase in the cost.

Meander Valley mayor Wayne Johnston said the council was happy enough for the new site to come forward.

"It was good to see that the government listened to Westbury residents and to the Meander Valley Council to a certain extent," he said.

"On the face of it the new site has not got the facilities of the industrial precinct site but the government is committed to putting the facilities there so it will be a great asset to Meander Valley."

Mr Johnston suggested the prison could be named the Vanessa Goodwin Correctional Centre after the late former Attorney-General Vanessa Goodwin.

"She was a great advocate for a Northern Prison and it would mean it was not referred to as the Westbury prison," he said.

Labor spokeswoman Jen Butler said the government's switch was confirmation that Labor had taken the right position.

"The location of a maximum-security prison next door to a historic tourism village was inappropriate and was never going to work," she said.

Tasmanian Greens leader Cassy O'Connor said that she believed some in the town still had the same concerns.

"For a community that nine months ago was thrown into a state of complete distress when a decision was made with no consultation today's news is being received with mixed feelings," Ms O' Connor said.

Northern Tasmania Development Corporation welcomed the compromise location at Westbury and the economic boost it would provide.

"We hope the new site will allay many of the objections raised by some in the community," chief executive Mark Baker said.

"The independent Social and Economic Impact Study shows the $270 million development will create 739 additional full-time equivalent jobs during construction and 372 ongoing jobs during operation," Mr Baker said.

"As well as a $280 million economic output during construction, a further $268 million output will come from prison operations."

Mr Baker added it was the multiplier effect of that investment where Meander Valley and greater Northern Tasmania can really benefit.

"These jobs and the income generated in Northern Tasmania will be an ongoing source of sustained economic growth over the next decade."

Property Council executive director Brian Wightman said the $270 million project was critical for Tasmania's jobs' pipeline.

"Several Tasmanian firms have significant expertise in prison construction after redeveloping the Risdon facility," he said.

"They now look forward to the release of tender documents.

"The opportunity to tender in a potentially compressed market is essential for local businesses who are desperate to lock in work as soon as possible.

The Tasmanian Chamber of Commerce and Industry said the government's Westbury prison reset was welcome following months of debate.

"Today's announcement showed that the government was listening to the concerns of the community," chief executive Michael Bailey said.

"A good government is one that puts a plan forward for feedback and then takes that feedback on board.

"A Northern Prison is well and truly due.

"Risdon is crowded and prisoners from the north and north-west should be accommodated closer to home to help with their rehabilitation.

"What's most important now is that the government delivers this project quickly and gets shovels in the ground as soon as possible."

The Civil Contractors Federation welcomed news that the government had selected a new preferred location close to Westbury.

CCF chief executive Rachael Matheson said the construction of a new northern prison would support hundreds of jobs.

"We welcome the announcement and call on the government to make sure the project continues to be delivered within the projected timeframes," he said.

Former Legislative Council member for Western Tiers Greg Hall said the move was a win for social justice equality in Northern Tasmania.

"For about half of the State's prison inmates to have access to friends and family will greatly assist rehabilitation," he said.

Mr Gutwein said the proposed Major Projects legislation would not be relied on to get the jail through the planning process.

The SEIS undertaken by SGS Economics and Planning comprised an Economic Impact Assessment with a Cost-Benefit Analysis.

The study included the results of the telephone survey of residents in the Westbury postcode area and a mail survey of Meander Valley residents and a survey of businesses located in the Valley Central industrial precinct.

"The telephone survey of the Westbury postcode area included calls to a random selection of 333 residents," the report said.

"39.1 per cent of respondents supported or strongly supported it and 43.9 per cent either opposed or strongly opposed it, while 17 per cent were neutral.

"A mail survey was posted to 8581 households with 2226 returned. 50.3 per cent supported it, 36.5 per cent either opposed, while 13.2 per cent neutral."