Canberra universities suffered a drop in people studying nursing this year as students were lured to other states, including NSW and Victoria, by financial incentives.
The University of Canberra experienced a drop in applications for nursing degrees of more than 35 per cent.
But the ACT government has brought an offer to the table with nursing, midwifery and allied health students at the University of Canberra and the Australian Catholic University to receive a $3000 a year cost-of-living payment over a three-year period.
Students will also be given $1000 when they undertake work placements.
University of Canberra faculty of health acting executive dean Stuart Semple welcomed the government's announcement and said the decline in students at the university was probably a driving factor in the decision to provide payments.
"I think this has been a strong driver as to why the government has arrived at this decision," he said.
There is a chance demand will exceed supply with about the payment only able to go to about 280 students. Professor Semple said the university was prepared to ask for more funding if this happened.
"This is obviously a period we need to see how this works, but it is likely given the student numbers that demand will exceed supply," he said.
There are some eligibility requirements. A student must be an Australian or New Zealand citizen or hold permanent residency or a humanitarian visa. Both universities are hopeful it will target rural or remote and Indigenous students.
Australian Catholic University allied health head of school Elspeth Froude said students experiencing hardship would also be targeted.
"This funding will really make a big difference to students," she said.
The payments are part of a $3 million package, included in the 2023-24 budget, to support students undertaking some health degrees in the capital.
Health Minister Rachel Stephen-Smith said the government examined what other jurisdictions were doing and consulted with universities about how best to distribute the money.
"We looked at what other jurisdictions were doing and we looked at what we could afford in the budget and we talked to your universities about what was going to fit in with the other array of things they offer students," she said.
However, there won't be a requirement for a student to work in the ACT health system upon graduating if they receive the payments.
"We don't think that's necessarily a particularly important part of the initiative. What we really need to do is ensure that students feel confident living and studying here in the ACT that they get really good clinical placements and they have a good pathway into well remunerated work," Ms Stephen-Smith said.
Ms Stephen-Smith said enterprise agreements for nursing and midwifery were close to being completed. She said the government was also looking beyond money and at other conditions, emphasising midwife-to-patient ratios.
"We will have some offers to be making in the next little while, we've obviously been sitting down working through the detail of enterprise agreements with both the Australian Nursing and Midwifery Federation and with the relevant unions for the health professionals enterprise agreement," she said.
Allied health workers including radiographers and radio therapists have taken part in industrial action over recent weeks over the government's offers. The workers are demanding higher pay and better conditions.
