The new regulations come in the wake of the death of a three-year-old Mornington Peninsula child, who died after being fed raw milk by his parents. Three children were also admitted to hospital in the last year after being fed milk from the same producer, Mountain View Organic Dairy.

The death has been referred to the coroner, and federal authorities are investigating whether raw milk should be banned from sale altogether.

Raw drinking milk is banned from sale in Australia due to health concerns.

To be legally sold as drinking milk, producers must pasteurise it - heating  it to 72 degrees for 15 seconds, long enough to kill off any harmful bacteria and parasites present in the milk, which may include E. coli, campylobacter and salmonella.

New Consumer Affairs Minister Jane Garrett announced on Sunday morning that the state government was not prepared to wait for the outcome of the federal investigation.

Ms Garrett will introduce regulations on January 1 requiring all raw milk sold in Victoria to include a bittering agent.

The agent, commonly used in varnish to prevent nail-biting, would make treated milk "absolutely unpalatable" and the drinker would "recoil in horror", Ms Garrett said.

"Raw milk has legitimate uses, but it is not safe to drink. We are going to better regulate the industry to protect consumers."

In December, Victoria's Chief Health Officer, Dr Rosemary Lester, said she was concerned about Victorians drinking raw milk after several recent hospital admissions.

"Everyone is vulnerable to illness caused by the pathogens present in raw milk, but the risks are even greater for young children and for the elderly, those with underlying health problems, immunocompromised or pregnant," Dr Lester said.

The Health Department does not collect data on raw-milk-related hospital admissions. A spokesman said he could not recall many cases in the past few years.

Bittering agents, the most commonly used of which is Denatonium, are non-toxic additives. They're commonly used and widely available, and the government believes producers can easily add the agent to their product.

Producers are able to get around the ban by selling their milk as a cosmetic product. The milk implicated in the death was sold as bath milk, and carried a warning that it was not for human consumption.

Despite that, health food shop owners have said it is common knowledge customers have been buying the milk to drink rather than to bathe in it.

Dairy Food Safety Victoria says it has four licensees in Victoria producing and selling unpasteurised milk.

Food Standards Australia New Zealand recently conducted an inquiry into food safety regulations around raw milk, particularly as a product in the making of cheese.

FSANZ has provisionally approved the use of raw milk in cheese making in Australia. That approval will require sign-off from state ministers in Febuary.

Ms Garrett said she would consider FSANZ's proposal when it was put before her.

Raw milk sales are legal in New Zealand, where farmers are allowed to sell up to five litres of unpasteurised milk at their farm gates to families buying it for personal consumption.

Mountain View Organic Dairy declined to comment for this story.