Westpac chief executive Brian Hartzer believes clarity on "taxation and infrastructure" will be crucial if business investment is to offset a drop in consumer spending should interest rates rise.
Mr Hartzer has regularly championed the role of infrastructure spending in giving business the confidence to expand and invest.
Speaking on the eve of the federal budget, Mr Hartzer said it could become even more important should debt-laden homeowners wind in spending in the face of interest rate rises.
Despite the Reserve Bank holding the cash rate at a record low of 1.5 per cent, Australia's big banks have already raised mortgage rates to reflect higher funding costs, a desire to slow riskier lending, and increased capital requirements.
"We've seen in our own book where infrastructure commitments, especially in transport, have given businesses the confidence to invest in their capacity - leading to a positive spiral of jobs and investment in those regions," Mr Hartzer said on Monday.
"We, therefore, support recent announcements by federal government in this area and support in principle the idea of governments using debt to fund investments that expand the nation's capacity."
Treasurer Scott Morrison has said the government will change the way it presents debt in Tuesday's budget, setting out how so-called "good" debt has been deployed to boost investment and productivity.
Top of the current infrastructure list is Sydney's second airport at Badgerys Creek.
"An increase in business investment will be important to sustain growth," Mr Hartzer said.
"Federal and state governments have an important part to play in this by providing policy clarity in areas such as taxation and infrastructure."
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