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RBA governor Philip Lowe says major infrastructure funding should be run like monetary policy - at arm's length from the government - so that voters trust it is fit for purpose.Credit:Alex Ellinghausen

"If the government can build productive capacity by borrowing at low interest rates,it seems like that is a good thing to do,"he said.

"Governments here and around the world should have their top drawers full of really good ideas that are shovel-ready in case growth slows."

Dr Lowe also said major infrastructure funding should be run like monetary policy - at arm's length from the government - so that voters trust it is fit for purpose.

"If we don't get it right then the public doesn't trust the politicians,"he said at the Crawford leadership forum in Canberra on Monday.

The Grattan Institute found only two projects in this year's federal budget had their business case approved by Infrastructure Australia,while half of the projects announced were not on the regulator's list at all.

Election funding announcements also overwhelmingly flowed to marginal seats. One Liberal-held electorate,Corangamite in Victoria,was given $26,500 per person in infrastructure commitments.

"Some more independence with project selection would be a good idea,"Dr Lowe said."There is a parallel with monetary policy. Thirty years ago it was considered crazy to give me and my board the power to set interest rates.

"We got sub-optimal outcomes by leaving those decisions to politicians. The same logic could be used for infrastructure selection."

Former Reserve Bank board member Warwick McKibbin said the government should not be afraid to go into debt if the money was being spent on worthy capital investment.

"The fixation with the deficit is the problem,"he said."The fixation is misplaced."

Treasurer Josh Frydenberg will not consider reducing the forecast budget surplus if economic headwinds grow but is prepared to bring forward projects such as roads and car parks to boost the economy.

Dr Lowe said the central bank could not be expected to be responsible for all stimulus through monetary policy. He noted the government also had to look at incentives in the tax system for innovation,wealth generation,public service delivery and competition to actually produce long term growth.

"Beyond fiscal expansion,the best policies are those that reduce uncertainty and create a positive environment. It's not easy to do but it's not impossible,"he said.

Dr Lowe said the uncertainty being fuelled by the US-China trade dispute had created a flow-on effect.

"This is now having a major impact on investment around the world,"he said."What we are seeing right around the world is firms waiting. If we have enough people sitting on their hands then it is going to have a major effect on the global economy."

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