The mid-year budget update, released on Wednesday by Treasurer Jim Chalmers, reveals reforms to the Infrastructure Investment Program will decrease payments for major projects by billions of dollars up to 2026/27.
The savings followed an independent review of the Infrastructure Investment Program.
However, the government remains committed to a 10-year pipeline of land transport infrastructure projects worth $120 billion.
Working with the states and territories to make the infrastructure program more sustainable, a $6.8 billion boost will support the delivery of current projects and re-prioritise funding.
"This will help deliver the infrastructure Australia needs, create jobs and relieve capacity constraints that can drive inflation," the budget update reads.
The independent review found multi-billion dollar cost blowouts had made it unsustainable.
Finance Minister Katy Gallagher said infrastructure requests and project planning discussions would continue between the Commonwealth and the states and territories.
"This certainly reflects that big response that we had to the review that was done," she told reporters in Canberra.
The government will also set aside $4.2 billion for road safety infrastructure, including a gradual increase in funding for the Roads to Recovery Program to $1 billion a year.
The Commonwealth will contribute to major infrastructure projects in a 50-50 split with states and territories.
Major projects were previously entirely funded by the federal government or the cost was shared 80-20.
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