Regional Economic Development Minister Shane Jones yesterday announced the funding boost to the estimated $165million project.
The reinvigoration plan involves demolishing several buildings, including two category-2 listed historic buildings, in the block between Esk St and Tay St, bordered by Dee St and Kelvin St.
The project gained resource consent in June, but now faces questions over funding.
Mr Jones was among those on the inaugural Air New Zealand direct flight from Auckland to Invercargill last night.
The mixture of the direct flights and the funding boost meant yesterday was a "happy day for Invercargill and the wider Southland district", he said.
The funding followed an initial Provincial Growth Fund investment of $995,000 in December towards a business case, feasibility study, concept designs and procurement strategies.
"The business case shows the project could boost Southland's real GDP by around $48million per year while creating more than 500 jobs during the construction phase and a further 300 retail and hospitality jobs once the redevelopment is complete," Mr Jones said.
The results would be an "absolute game-changer for Invercargill and the wider region".
"With the help of the Provincial Growth Fund, the redevelopment is an opportunity to attract businesses and shoppers back to the central city and put vacant or abandoned buildings back into use."
Invercargill might be a "small city at the bottom of the South Island", but it was one with "big vision", he said.
"It's a project with widespread support from the local community and one that the Government is proud to support."
Invercargill Mayor Sir Tim Shadbolt could not be reached for comment yesterday evening.
