The Abbott government will offer NSW a $2 billion loan at a discounted rate to speed up construction of Sydney's WestConnex road project.

Premier Mike Baird hailed the news as a “fantastic announcement” which will transform western Sydney.

“It is a good news story for the people of western Sydney and a good news story for the people of Sydney,” he told reporters in Sydney on Thursday.

When completed, the WestConnex is expected to cut travel times between the airport and Parramatta by 40 minutes.

“In simple terms, it means less time on our roads and more time with our families,” Baird told question time.

The concessional loan, to be included in next week’s federal budget, will fund the second stage of the motorway linking Parramatta with Sydney Airport, allowing it to be completed a year earlier than planned. Stage two will widen the M5 East and build a 6km tunnel link between St Peters and the airport.

The extra money will allow both stage two and stage one – the widening and extension of the M4 – to be built at the same time. The loan comes on top of $1.5 billion the Abbott government has already pledged to the project.

The $11.5 billion WestConnex project will create 10,000 jobs and allow motorists to bypass up to 52 sets of traffic lights, Baird said. He added that it is expected to deliver more than $20 billion in economic benefits.

Construction of stage two is expected to be completed by 2019.