The federal government will provide $135 million to help build light rail from Alinga Street to Commonwealth Park in a major boost to the next stage of Canberra's light rail network.
Deputy Prime Minister Michael McCormack will on Wednesday announce the significant contribution to the first part of the almost $2 billion project.
He said the cash would help make it a reality, creating jobs and busting congestion in the ACT.
Chief Minister Andrew Barr has welcomed the cash injection to the long-awaited expansion of the Gungahlin to Civic light rail line.
The funding announcement comes after the federal government signed off on crucial environmental approvals last month, bringing the network extension one step closer.
The ACT government is yet to allocate significant funding to stage 2A of light rail, saying June's budget will include initial funds for the project.
It is estimated stage two of light rail will cost close to $2 billion, with stage 2B requiring the bulk of the funds.
That stage will run from Commonwealth Park to Woden and is awaiting more complex federal approval processes because it runs through the parliamentary triangle.
Mr Barr had long called on the Commonwealth to provide funding for the major project.
The federal government contributed about $69 million to stage one through the asset recycling scheme.
Mr Barr said the significant contribution from the Australian government for stage 2A showed the importance of the project for the Territory.
"The Commonwealth's support for the project is welcomed, and it follows in the footsteps of the financial support received for stage one of the ACT's light rail network ," he said.
"The project is critical to the Territory's jobs and economic recovery plan.
"I look forward to working with the Commonwealth on progressing the approvals for the entire stage 2 project."
The ACT government has not provided a clear timeframe for the build but it appears most likely enabling works to raise London Circuit in line with Commonwealth Avenue won't begin until early next year.
This work will take two years before tracks can begin to be laid, bringing the likely completion date to 2025.
The government is still awaiting National Capital Authority approval for stage 2A and is yet to sign any contracts to build the project.
Senator for the ACT Zed Seselja said for Canberrans, extending the Gungahlin-City light rail made sense.
"It is important we get light rail right for Canberrans. With construction anticipated to commence in 2022, Stage 2A is the first leg of bringing light rail to Woden, and will extend the existing route by three stops to Commonwealth Park," he said.
"Today's announcement boosts the Australian Government's infrastructure bonanza in Canberra to more than $1.4 billion in recent years."
Stage 2A will add 1.7 km of track and three new stops south of the existing line operating wire free from Alinga Street through to Commonwealth Park.
Mr Barr says it will also transform southern parts of the CBD, with the light rail enabling works to raise London Circuit better connecting civic to Lake Burley Griffin
An additional 2,500-3,000 passengers a day are expected in the first operating year.
Transport Minister Chris Steel said stage 2A would bring more jobs and boost the economy.
"Light rail is seeing more Canberrans choose public transport, with more than 43 per cent of people surveyed stating they had never used public transport before catching light rail," he said.
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