Infrastructure Minister Catherine King says two new regional grants programs will be introduced, with a coalition scheme that was criticised by the auditor-general to be dumped.
Ms King announced ahead of Tuesday's budget, the Albanese government will scrap the Building Better Regions Fund in favour of the new programs she described as "much more transparent".
One of the schemes will be a "competitive" grants round for councils and not for profits, and the other for "precincts" in regional cities, and larger scale rural projects.
"We want our investments to be of value to people and to taxpayers, and to improve the liveability of the regions," Ms King said.
The budget will set out $1 billion over three years for the schemes, to be known as the Growing Regions Program and the Precincts and Partnerships Program.
A review found the Building Better Regions Fund, which was set up in 2016 for infrastructure and community projects in areas outside of capital cities, favoured Nationals-held electorates.
Ms King said the government was trying to sort through election promises made by the coalition.
"Anything that's an election commitment, if it wasn't an election commitment of ours, it won't be in the budget," she said.
Opposition infrastructure spokeswoman Bridget McKenzie said the government had a "vendetta" against regional Australia by making cuts to projects in the budget and that the Nationals had their "worst fears confirmed".
"I've been really disappointed and found it quite offensive ... the way the Labor Party has framed up this budget as any spending out in rural and regional communities being waste," she told reporters in Canberra.
"That's simply not the case."
Nationals senator Matt Canavan said six months into a new government, Prime Minister Anthony Albanese's word could not be trusted, with doubt cast over the future of the Rockhampton ring road, which Labor committed to in January 2019.
"I don't quite think the Labor Party understands the hornets nest they have poked," he said.
"This goes to his integrity, he said it would be a certainty and now he's scrapping it for the people of central Queensland."
The Nationals fear other projects that could be scrapped include the $600m Paradise dam at Bundaberg, $400m for beef roads, and $483m for the Urannah dam west of Mackay.
