Work-hungry road builders want councils to do more to match Government infrastructure funding and hasten economic recovery in provincial New Zealand.

Industry group Roading NZ said the provinces were missing out on projects because of a reluctance by councils to dig deeper into ratepayers' pockets.

Chief executive Chris Olsen said yesterday that international research showed infrastructure spending was one of the best ways to stimulate regional economies, and roading used a high level of local materials and labour.

He was surprised local councils appeared not to fully appreciate that fact, and were not doing more to match Government stimulation measures.

His comments follow the Transport Agency's disclosure that it spent $40 million less than a budgeted $353 million on Government subsidies for new or improved local roads in the past financial year.

That was because of a shortage of local council projects available to attract subsidies, which vary from 43 per cent in urban areas to as much as 70 per cent in some rural districts.

Mr Olsen said subsidies probably averaged around 50 per cent across the country, meaning a shortfall from council coffers of about $40 million and resulting in total under-spending of $80 million on local roads.

The Transport Agency report said its $40 million was reassigned to "other activities within state highways".

But Mr Olsen said much of the highway money was being spent on the Government's seven designated roads of national importance, which were mainly near big cities, and local communities were missing out.

Local councils' spending would serve to stimulate provincial economies, while delivering needed infrastructure, he said.

He confirmed the Herald's understanding from a senior Transport Agency official that some contractors were offering prices up to 20 per cent lower than two years ago, a situation "clearly unsustainable in the long term".

He acknowledged that council under-spending on local roads had been a problem for several years, and said he raised it in a paper to last year's Job Summit.

The Transport Agency was also left with $40 million in unclaimed subsidies at the end of 2007-08, and a Government budget allocation of $436 million the previous year was under-spent by $138 million after just one new urban road and no rural roads were completed.

Transport Minister Steven Joyce confirmed last night that the Government, having spent so much extra money trying to boost the economy, was concerned about a risk of "losing jobs out the other end".

He has met Roading NZ and the Contractors' Federation, Local Government NZ and the Transport Agency to ensure the maximum possible funds were spent during this summer's construction season.

Local government reported that it believed most projects were on track to receive their allocations, but had agreed to help the agency to reallocate funding to alternative candidates "if for whatever reason a local authority is unable to do their part".