The Government's plan to triple the first home owner grant from $7,000 to $21,000 for newly-built homes has been welcomed by the housing industry, which says it will provide a much-needed boost to the sector.

As part of a $10.4 billion package announced today designed to stimulate the Australian economy in the midst of the global downturn, the Government will also double the grant for existing homes to $14,000.

Prime Minister Kevin Rudd says a good performance in the housing sector is critical for the economy's overall performance.

Executive director of the Housing Industry Association (HIA) Queensland branch, Warwick Temby, says he expects the move to result in an extra 15,000 houses to be built around Australia over the next 12 months.

"We think it's a tremendous fillip for the home-building industry and for home buyers," he said.

"Home buyers have been doing it tough for the past few months and we think it's a great initiative and it'll turn into some new housing activity very quickly."

HIA spokesman Chris Lamont says the tripling of the grant will arrest the slide that has affected the housing industry in recent times.

"We think that this will provide the necessary assistance in a downturn in respect to new housing activity that will make it worthwhile for first home buyers to consider a new home of their own," he said.

Peter Jones from the Master Builders Association says the boost to the first home buyers grant will lead to more new homes being built.

"Which is the area of most concern. At the moment in Australia we're under-building to the tune of 30,000 dwellings per annum so we welcome this initiative," he said.

Inflationary fear

The Real Estate Institute (REI) fears a doubling of the grant for first-time buyers of existing properties might drive up prices.

Its South Australian president Robin Turner says established housing could become more costly.

"My big fear with the doubling of the first home owners' grant is that it might actually be a bit inflationary on prices because it's certainly going to feed demand," he said.

Queensland's Deputy Premier Paul Lucas has thrown his support behind the federal move.

"This is great, not only for the industry with a welcome shot in the arm to provide a welcome stimulus, but also for first home buyers," he said.

"It's also about housing affordability and getting young families and young couples into housing.

"It will provide an extra incentive for the building industry to get out and build new houses."

The increase in the first home owner grant is expected to cost the Government $1.5 billion.