Prime Minister Stephen Harper stops at a highway construction site in Kitchener, Ont., on Thursday while launching a regional development agency for hard-hit southern Ontario. (Dave Chidley/Canadian Press)

Prime Minister Stephen Harper announced on Thursday the launch of a new agency to boost economic development in southern Ontario.

Harper said the Federal Economic Development Agency for southern Ontario, which will be headquartered in the city of Kitchener, will support economic development, innovation and diversification. The creation of the agency had been previously announced in the federal budget.

"This new agency will help southern Ontario's communities, workers and businesses position themselves to take advantage of exciting new economic opportunities when the recovery eventually and inevitably takes hold," Harper said.

Harper said Minister of State Gary Goodyear will be responsible for the agency and will embark on a tour of the region in the coming weeks.

The agency will have a $1-billion budget over five years.

The agency joins other federal economic development programs that help out regions, including the Atlantic Canada Opportunities Agency, the Canada Economic Development Agency for the region of Quebec, Western Economic Diversification Canada and the Federal Economic Development Initiative of Northern Ontario.

Harper said Kitchener was chosen because the government wanted a central Ontario location, but not one in the Greater Toronto Area.

With files from The Canadian Press