HUNTER councils will receive an extra $3.8 million in federal grants this year, giving some relief after a what has been a difficult 12 months for many municipalities.

Councils across the region are facing higher costs in running their elections this year and some have been predicted to lose heavily in the fallout from the subprime mortgage crisis.

Federal Infrastructure Minister Anthony Albanese said he would distribute an extra $40 million to NSW councils to help them keep up with maintenance and improve assets.

Lake Macquarie City Council is in line for the greatest funding boost, with an extra $1 million for roads and general purposes.

Mr Albanese said the grants were untied, so that councils could spend them according to council priorities.

"Councils will be able to spend these funds on a range of priorities including roads, parks and pools, libraries, community centres, health and child-care services, and water and sewerage services," he said.

Lake Macquarie will receive $13,923,031 from the Federal Government.

Mayor Greg Piper said the funding boost was well above CPI and would be very welcome.

"I think that's a good result," Cr Piper said.

"Councils obviously have a lot of costs, particularly for capital costs and maintenance."

"Rates are usually pegged at the CPI and that's well below the real costs and that's part of the ongoing problems we face."