NEW England MP Barnaby Joyce will lobby the federal government to contribute $10 million to Tamworth's university campus, from a new funding stream announced in the drought-relief package.
To stimulate regional economies, $200 million from the Building Better Regions Fund will be redirected to drought-affected communities.
"I will be seeing if that spend can go towards the university," Mr Joyce said.
"You can apply for up to $10 million for a major project, so it fits the bill for the university. If we can get that going, it will really stimulate the local economy."
Tamworth mayor Col Murray said council was "on the same page" as Mr Joyce.
"As soon as that was released, council identified it as a potential funding source," Cr Murray said.
The state government has already committed $26.6 million to the proposed University of New England campus. Should the federal government fork out $10 million, the project would still need about $25 million before construction can get underway.
However, Cr Murray doesn't believe that will impact the Building Better Regions application.
"On face value it looks like a really good opportunity, I don't see any stand out barriers," he said.
"One of the implications is that universities aren't eligible to apply, so in this instance council will be the applicant."
Cr Murray said the long-term benefits for cities with a university campus were well established, but the short-term benefits from its construction would be just as important as businesses continue to feel the drought's financial pinch.
"Our construction industry is really feeling the pain off the back of the drought and the tightening of the financial sector," he said.
"This would be an outstanding way to inject more steam in to that part of our economy."
The Tamworth University Reference Group said it was writing a letter of support for the application.