Mr Baird was joined by Minister for Roads and Freight Duncan Gay, Kiama MP Gareth Ward and South Coast MP Shelley Hancock to mark the milestone.

The bypass, which Mr Baird dubbed the "most significant transport infrastructure investment being made on the South Coast", will provide an 11.6-kilometre stretch of four-lane highway between Toolijooa Road and Schofields Lane.

"Many in the community doubted this day would ever come," Mr Baird said.

"When we were in opposition, the roads minister and I made a commitment that we would get this project under way [and] today we are delivering.

"The $580 million project is the biggest investment in the Princes Highway, [and is] long overdue, but we have found a way to do it and we are very proud to do it."

Mr Gay said the price of progress would mean short-term inconvenience for motorists, but long-term investment for the communities involved.

"The Princes Highway, once known for holidaymakers and Holstein [cattle], is now known for diggers, scrapers, graders and construction," Mr Gay said.

"This is a government that's about fixing things; 65 per cent up in our spending on the previous government - that is commitment, that is fulfilling what we said we'd do."

Mr Baird said money for the bypass was "fully budgeted".

"Some $170 million of the money comes from Restart NSW, the money that has come from asset transactions. The balance comes from the roads budget," he said.

"The only risk to this project is Labor. Labor don't know where the money's coming from.

"They are throwing around money they don't have and they're allocating to projects they don't know."

The bypass project is expected to generate 400 jobs.

The road is due to open to traffic by mid-2018, weather permitting.