Improving connectivity between the Illawarra and Western Sydney is identified as increasing in importance as the Western Sydney Aerotropolis expands, while intra-region connectivity remains a significant hurdle.

"With parts of the region's transport network already experiencing congestion, accommodating the anticipated growth in travel without behavioural change would require significant investment in additional road infrastructure, which is likely to be cost prohibitive, challenging to deliver and unsustainable over the longer term," the report notes.

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RDA Illawarra CEO Debra Murphy, who was involved in the development of the report, said that planning for Western Sydney's growth needed to account for the regions that would feed the future third Sydney CBD.

"Planning doesn't need to be just done for Western Sydney, it needs to be done with a view that regions are here to work in tandem with whatever developments are happening in capital cities."

Housing is the next hurdle the Illawarra faces, with an estimated demand for an additional 58,000 houses by 2041. The report identifies in particular the mismatch between the housing on offer and what is needed.

"The expansion of residential projects in the Illawarra region urgently needs to incorporate housing options for low and very-low income households to enable expected growth. In 2021, the total number of properties deemed affordable and appropriate (up to 30 per cent household income) was 1 per cent for the region."

The final gap is the freight task, an issue that Ms Murphy notes is often passed over in favour of other projects.

"As time goes on, the freight task gets pushed out because of a lack of certainty."

With 60 per cent of goods transported via road freight in the Illawarra-Shoalhaven and a projected increase in freight activity, attention will be needed on building freight rail capacity.

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While the Illawarra shared with the rest of the country the issue of housing - the most identified regional infrastructure gap nationally - it avoided national trends of issues of water security, broadband and mobile connectivity, and access to further education and skills training.

The findings are part of the Regional Strengths and Infrastructure Gaps report, developed by Infrastructure Australia, which assesses the strengths and gaps of regional areas around Australia.

Infrastructure Australia chief executive Romilly Madew said regionalisation, accelerated by the pandemic has compounded pressure on already stretched regional infrastructure.

"By drawing out commonalities where they exist, we are aiming to improve information sharing and enable a coordinated, forward-looking view of the challenges and opportunities in Regional Australia," she said.

"We hope communities embrace the opportunities highlighted in this report and that it becomes a turning point for greater collaboration amongst stakeholders."

The report, the first of its kind, highlights healthcare and social assistance, knowledge sector, transport and manufacturing as the Illawarra's key growth industries.

The economic assets of the region include its location close to Sydney, Port Kembla while the natural environment supports tourism and agriculture and the Illawarra's high quality educational institutions and health facilities support the area's social capacity.

However, with the Illawarra expected to experience significant growth and close to the major growth centre of Western Sydney, for the region to sustainably grow, its infrastructure gaps will need to be addressed.

Ms Murphy said the report could catalyse regional bodies to advocate for the most needed infrastructure in the Illawarra.

"We are competing for scarce resources, in terms of public infrastructure commitments, so the more that we can use the evidence that was brought forward from this report, and collaborate and work together, the better outcomes that we'll get."

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