Registered nurse Glenn Hayes said the $128 million in federal funding - added with the $251 million in state funds already committed - would bring the ageing facility into the 21st century.

"We're really thrilled with the announcement from the Morrison government, that has been matched by Labor," he said.

"We've been campaigning for an upgrade to the hospital for many years and in recent months it's been really pleasing to see construction started by the state government.

"Our hope is that the additional federal funds will be used to provide frontline services, and hopefully that's done in negotiation with the community and service providers to direct the best care to the community."

Read more: Multiple assaults at Shellharbour Hospital leave staff fearful

As the NSW Nurses and Midwives Association's Illawarra mental health nurses branch president, Mr Hayes said he would like to see some of that funding directed to the hospital's mental health facilities.

"The facilities are quite old and do need to be modernised, to provide a more conducive, therapeutic environment for our patients," he said.

Doctors too have welcomed the additional commitment by both political parties.

Dr Geoffrey Murray was one of more than 80 doctors from across the health district who have been vocal in their call for more funds for the hospital's upgrade.

Late last year, after the NSW Government decided not to go ahead with a proposal to operate the hospital under a public-private partnership, the doctors penned a letter to the Mercury claiming the $251 million was inadequate for the project.

Dr Murray said staff specialists met on Monday: "While we do not know details of the government's announcement, we broadly welcome the additional funds to redevelop the hospital".

However the doctors still believe it would take around $500 million in total to fully redevelop the hospital on its current site, or on a greenfield site.