VH-EWF was on a visual approach to Melbourne runway 34, tracking via the Essendon runway 26 localiser for a right base. VH-HCY took off from runway 34 at Melbourne and was cleared to make a left turn to track across the airfield on a south-easterly heading, to remain east of the runway 34 centreline for a left base for runway 35 at Essendon. VH-HCY had been cleared to maintain 1500 feet. The Melbourne Aerodrome Controller (ADC) intended that VH-HCY pass behind VH-EWF and that he would provide visual separation. When VH-HCY was over the airfield, the ADC momentarily diverted his attention to the radar screen. When he looked back to check the position of VH-HCY he was unable to see the aircraft. As VH-HCY had already been transferred to Essendon Tower frequency, the Melbourne ADC asked the Essendon ADC if he could provide visual separation. The response was that he could not. The Melbourne ADC then instructed VH-EWF to climb immediately to 2000 feet. Separation between the two aircraft reduced to less than the minimum required. When the confliction was resolved VH-EWF was cleared to continue the visual approach. The pilot of VH-HCY said that he had VH-EWF in sight from when it was east of Essendon and was watching the situation closely. The Melbourne ADC had not given traffic information to either aircraft on the other on the basis that he was providing visual separation. When he instructed VH-EWF to climb to 2000 feet he advised that the climb was due to conflicting traffic. There were other options available to the ADC for the processing of these two aircraft but these were not adequately considered at the time. Hazy conditions existed on the day of this incident. Factors The following factors were considered relevant to the development of the incident: 1. The option chosen for tracking VH-HCY was a poor option in that it put the aircraft into airspace that created a potential conflict with VH-EWF. 2. Having tracked VH-HCY in the manner chosen, the ADC then inappropriately relied on visual separation between the two aircraft on converging headings in hazy conditions. 3. The ADC did not maintain vertical separation by restricting VH-EWF's descent to 2500 feet in a situation where radar and visual separation were reducing in hazy conditions. 4. The ADC did not recognise the deteriorating situation and initiate alternative action until it was too late to prevent the loss of separation.