Minister for Training and Skills Gayle Tierney said the funding would create state-of-the-art training facilities for up to 160 students enrolled in South West TAFE's diploma of nursing.

That includes hospital grade beds, advanced monitoring equipment and life support manikins across both the Warrnambool and Hamilton campuses.

Ms Tierney said some equipment had already arrived in preparation for the 2023 year and would help entice students to stay in the region.

"The shortage in terms of healthcare workers is there," she said.

"We need our young people here in a critical mass so we have strong capability and capacity in our regional towns and cities.

"...We need young people in particular to stay in the region and to take up unfilled jobs."

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More than 90 students have completed the diploma since its inception in 2019 and about 100 students were currently enrolled in the program.

A South West TAFE spokeswoman said while historically many students had chosen to work in the aged-care sector, more recently acute care and pathology had emerged as the specialty areas of choice.

Chief executive officer Mark Fidge said he expected numbers to increase.

"It's a popular diploma," he said.

"We've been able to maintain our numbers fairly consistently with last year. Over the next year or so I expect it to go back up.

"It's a fantastic occupation and we know there's always going to be a need for workers in the healthcare sector whether that's in nursing, aged care or community services."

Ms Tierney said plans to expand South West Healthcare's hospital would further expand the job opportunities for students.

"It's very handy given we'll have a brand new wing of the Warrnambool hospital so that's exciting," she said.

Works on the wing are currently open to tender. An update on the project is expected from the health minister next week.

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