LOCAL councils have been challenged to form alliances with other councils to pool their borrowing capacity.

And the approach could help councils fund major regional infrastructure projects and give them more sway with lenders, Regional Development Minister Simon Crean said.

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Addressing a Regional Capital Australia forum in Geelong last week, Mr Crean said councils should look to use mutual societies to tap into the "strength of their collective asset base to fund new infrastructure" to benefit their broader region.

And he added the nation's infrastructure projects in future would not be funded by governments alone and would also require private money.

Mr Crean said more council amalgamations were "not the way to go because of the political difficulties".

"I'm more interested in looking for ways that unite, not create political battlegrounds," Mr Crean said.

Using private funds was now, as much as any time in Australia's history, a legitimate avenue because the country had a "big pool of savings" in super funds, he said.

Australia was a secure place to invest in, and partnerships with the private sector, in industry's such as grain and mining which needed freight infrastructure, were more viable than ever before.

Mr Crean told the forum that Australia's infrastructure needs, and regional capitals' infrastructure needs, were "not going to be funded by one government or indeed by governments alone".

"All levels of government have to work in partnership to this end and we have to find innovative ways to finance new infrastructure to tap into the resources of the private sector and in particular the superannuation funds," he said.

Meanwhile, host of the forum, Regional Capitals Australia chair Cr Mark Byatt called on the Commonwealth to make decentralising services a major priority ahead of the September federal election.

He said the Government needed to focus more on "deliberate policies" to invest in the growth of regional cities, instead of concentrating on state capitals.

Cr Byatt said now was the "perfect time" for regional cities to engage with governments about planning and implementing policies to help develop regional cities.

Cr Byatt said this would both benefit the communities that they supported and also take the pressure off over-development, which affected the livability of the capitals in the country.