MORE than $30 billion of infrastructure bonds are expected to be issued by the Federal Government over coming years as a key source of funding for the national broadband network.

Small investors and self-funded retirees will be targeted for the bonds, which are likely to carry robust interest, tax breaks and the Federal Government's AAA-credit rating.

"We expect there will be strong interest in these bonds," the Treasurer, Wayne Swan, said yesterday.

Australia has not been a big issuer of infrastructure bonds in recent years, but investors have been urging for these types of credit instruments, given their relative steady cash flows and low-risk profile.

However, the downside to the flood of government-backed bonds hitting the market is that it will draw funding away from other non-government-backed infrastructure projects that are planned.

"If you are a mum and dad investor with cash sitting in an account earning not much interest, and you look at [an infrastructure bond], it will be quite attractive," one banking executive said yesterday.

The Government is yet to finalise the funding needs for the project, but analysts expect more than $30 billion could be issued. The bonds will be sold by the Australian Office of Financial Management.

Cheap credit and fast-paced economic growth has powered an Australian infrastructure boom over the past eight years, with spending on engineering construction reaching about 5.5 per cent of GDP in fiscal 2008, according to investment bank Citigroup.

Citigroup is forecasting total infrastructure to fall by about 20 per cent over the two years to 2011, mostly as private sector spending falls away.

However, State Government spending is also expected to fall away, given a drop in revenue.