IN A clear sign that the club is expecting better times ahead, Melbourne has re-signed its coach Dean Bailey to a new two-year contract.

Effectively, the deal extends Bailey's tenure at the club by one year as his previous three-year agreement was set to expire at the end of this season.

Now, Bailey will take the helm at the Demons until at least the end of 2011.

Melbourne has endured lean times of late, winning just seven of 44 games under Bailey and finishing with the wooden spoon in each of his two years in charge.

But a host draft talent arriving at the club and some improved showings in 2009 have hopes of a revival high, something Bailey was keen on highlighting when speaking about his extension on Wednesday.

"It's a great challenge," he said. "There is still a lot of work to do … but I believe we have the list in place to take us there.

"I will be doing my utmost … and look forward to the challenge with great anticipation."

Bailey was appointed under the previous regime of Paul gardney and won praise from current president Jim Stynes for his application and adaptability at a time of off-field turmoil.

“This announcement is a show of faith and confidence in Dean as senior coach," Stynes said.

"We have belief in the direction he is taking the group, and a strong understanding of what he brings to the club.

“In just over two years, Dean has laid the foundations for what we think will be a prolonged period of achievement."

Stynes underlined the importance of stability for a young playing group and said that fact was uppermost in the club's thinking when it made the new offer to Bailey.

However, the president was unequivocal about the need for Melbourne to improve its on-field performances in the 2010 season.

“Last year, we won 32 quarters of football and this has to change," he said.

"We need to be in games right from the opening minute in order for us to win more matches for our members and supporters.”

Chief executive Cameron Schwab spoke of Bailey's "vision for a successful future" and indicated that the club was looking forward to the coming era with some optimism.

"[It's fair to say] we have the highest expectations of any club in the competition for the next decade", he said.

Bailey begins his new coaching contract in earnest when the Demons take on Hawthorn in an MCG home match on March 27.