But as the shopping centre giant Westfield announced yesterday a huge cut in asset values and forecast falling earnings, the Government stood by its decision to buttress the sector against further damage caused by the possible withdrawal of foreign funds. It was backed by the property industry.

The chief executive of the Property Council of Australia, Peter Verwer, told the Herald the fund was needed to preserve the value of existing developments and generate the confidence to continue building.

The commercial property sector had already taken a considerable hit in lost jobs and cancelled projects because of the global financial crisis. Any further downturn in property values or stalled projects caused by foreign banks withdrawing funds "will be the final straw", Mr Verwer said.

Westfield took the unprecedented step of issuing an earnings downgrade and a $3 billion cut in asset values for the current year, citing worsening global retail conditions.

A Government spokesman said the Reserve Bank had been "consulted" on the creation of the fund. However, it is understood the bank's concerns were not taken into account.

The fund would give financial support to major existing properties - such as office blocks or shopping centres - whose overseas lenders decided to withdraw their loans.

By stepping in to offer replacement finance, the fund would tend to support commercial property prices. But this would interfere with the normal workings of the market and prevent bank balance sheets adjusting accordingly, a situation the Reserve Bank would not condone.

Mr Verwer said properties unable to refinance would decline in value and may have to be sold, further driving down prices.

"Assets go up and down in value and the general view is they're going to go down in value over the short to medium term," he said.

"But the value should be based on the market fundamentals, not the decisions of [foreign leaders] just because they've got their massive political pressure in their own country to increase bank lending so they yank the credit chain to get the money back."

The Prime Minister, Kevin Rudd, said 50,000 jobs were at stake over the next two years if foreign banks began to scale back in Australia.

The Opposition Leader, Malcolm Turnbull, ramped up his claim that the Government had been conned by the banks to establish the fund.

"This Ruddbank … is designed purely, solely, to support values in the commercial property sector at the very high end," he said.

"It's got nothing to do with jobs. It won't add one job."

Mr Verwer, however, said there was a direct link with construction jobs. "If [investors] can't be certain about the funding of their existing projects they won't be creating new projects."

The Master Builders Association said the fund would stave off a potential "vicious cycle of fire sales, write-downs and a crisis of confidence".

The NAB monthly business survey reported yesterday that the package improved business conditions and confidence in December, especially in retail, wholesale and the service sector.