Mr Hindmarsh, who is also the chairman of the Cultural Facilities Corporation, said the government should treat the project as a priority for arts infrastructure.

''I am a strong advocate for the development of a new theatre in Civic - $50 million would include all of the supporting infrastructure like car parking,'' he said.

''I applaud the government undertaking a study and would expect it will lead to the successful outcome of a new theatre.''

Mr Hindmarsh said the new theatre would be in addition to the current Canberra Theatre Centre and should not be viewed as a knock-down and rebuild-style replacement for the venue.

''The consequence of knocking down and rebuilding is that we have nothing for two to three years - so that's a no-no,'' he said.

Chairman of the Australia Council for the arts Rupert Myer said he believed that if Canberra had a 2000-seat theatre, the big acts and big audiences would flow into the ACT.

''The Australia Council is not directly involved in funding our cultural infrastructure,'' he said.

''We are more interested in funding content.

''The general issue with cultural infrastructure is we don't talk about cultural infrastructure enough as essential infrastructure.

''Generally we are happy to talk about roads and hospitals but we don't do the same with our cultural infrastructure and we should.

''My general attitude is: build it and they will come. And that's very much been the experience of the National Gallery when we built the new wing.

''If you can offer new experiences people are willing to come.''

Artistic director of the Australian Ballet David McAllister said the ballet would like the opportunity to bring its major blockbuster works to the ACT if it had the performance space.

''When the Canberra Theatre opened it was about 1955 and the ballet company helped open it - that is my understanding,'' he said.

''I think they did Swan Lake at the time and it was a state-of-the-art building … it was a great size. Since then, all around Australia these big arts centres have cropped up - like the Opera House - and the dimensions of all these facilities have grown to such an extent that we have big stages around Australia.

''The facilities like fly towers and backstage facilities are all so large that our productions have grown to fill those venues so a lot of our newer productions have outsized what we can fit into the Canberra Theatre.''

McAllister said it was a case of not being able to fit the sets into the theatre space. ''This has happened for a number of reasons - the fly tower at the Canberra Theatre is quite low,'' he said.

''There is limited backstage room for big sets. It limits what we can bring to Canberra.

''We can bring the small productions and the traditional, older classics like Giselle and The Merry Widow but not our newer blockbuster works, which we have found are the ones that people love.

''The new ones are the Romeo and Juliet and the two new Swan Lakes. When we tour outside Sydney and Melbourne it's the big blockbuster works we take and that's what audiences expect to see with the Australian Ballet.

''It's the technical facilities we need to stage those ballets. We need the fly tower and room to actually house the set back stage.''

McAllister said that there were many aspects of the Canberra Theatre that he liked and would not want to change.

''My feeling is the capacity of the Canberra Theatre is a good size - (at 1200 seats) it's a great theatre for the audience and it's an intimate theatre,'' he said.

''My big wish would be if they would start again from the pit back. If they demolish the back stage and the stage and rebuilt it in a different dimensions it would actually be a great solution.

''Keep the building, but from the orchestra pit back - demolish it. You could build new infrastructure in the stage and have then a perfect venue.''

McAllister said he did not want to have the pressure of selling enough tickets to fill a 2000-seat auditorium and preferred the seating allowed for 1200.

''We have a 2000-seat theatre in Melbourne and there is a population of about four million there and we can fill that - but not always fill it,'' he said.

''With 2000 seats in Canberra, you can knock off the whole audience in a couple of nights.

''It would mean a shorter amount time (run of shows) than the audience expects.

''The Canberra Theatre is too small from a staging point of view but not an audience point of view. It is a good size.

''I mean 2000 seats is a lot of seats to sell and if you think about the percentage of population, it's a lot of the people you would have to sell tickets to.

''Basically it's the backstage area that is a problem for us.''

The board of the Cultural Facilities Corporation identified the constraints in its response to the Loxton report.

However, it ruled out remodelling the current theatre.

''There is no scope within the existing facility to re-work the Canberra Theatre to be in keeping with current touring needs and capacities, let alone the requirements of the future,'' it said.