The regional Victorian city of Wangaratta wants to become the centre of Australian foreign policy.

Wangaratta mayor Ken Clarke has told a decentralisation inquiry that the city of more than 27,000 people could host the Department of Foreign Affairs and Trade (DFAT).

The Rural City of Wangaratta's submission also said the Department of Health or Department of Infrastructure and Regional Development would be a good fit too, and that the region would welcome the potential millions of dollars it would bring to the local economy.

It is part of the Turnbull government’s National Party-led decentralisation agenda, which is considering business cases for forced moves of non-policy related public service positions from Canberra, Sydney and Melbourne.

All federal departments have been asked to justify why all or part of their operation would be unsuitable for relocation.

Cr Clarke said moving just a few jobs to the town would have a “significant multiplier effect across the community”.

“It is estimated that the economic benefit to the municipality resulting from the relocation of a government agency to the region would be significant,” he said.

“Through the effective use of NBN, road, rail and air access and other infrastructural assets these departments would have the benefit of being able to continue business with no impact on the day-to-day workings of government.”

At the same inquiry, Regional Development Australia - South West suggested capping the careers of public servants who had no regional experience.

“So far from there being a perceived problem in respect of attracting skilled staff, this would incentivise workers to seek regional postings,” the group said.