Formally launching his campaign to replace Corbyn in his constituency of Pontypridd, Smith said the money would go towards physical and social projects, including hospitals and roads, as well as funding college places and apprenticeships.
The policy mimics a £100bn plan promised by former Conservative work and pensions secretary Stephen Crabb in his own campaign to become Tory leader.
In a policy-heavy launch, Smith also repeatedly used late Labour MP Robin Cook's slogan of "ethical foreign policy" to promise a new War Powers Act, allowing for better parliamentary scrutiny of government, and pledged to force government departments to evaluate how to reduce their carbon footprints.
It was part of the former shadow work and pensions secretary's attempt to flesh out a campaign platform to take down Corbyn, who he said had been guilty of "posturing".
"Jeremy has been right about so many things. Labour has to be a party that is about investment not cuts. We have to be a party that understands that austerity is utterly self-defeating," Smith said
"But it's not enough to just be anti-austerity. You have to be pro-something."
Smith also re-iterated his commitment to at least evaluating a second referendum on European membership, claiming that many voters felt they had been lied to since last month's vote.
"The Brexiteers lied about £350m. They lied about the easy answers to immigration," Smith said, referring to the next 18 months as a "test drive" of the Brexit verdict.
"We need to continue to trust the British people. And over the next 18 months as the true picture emerges of what a post-Brexit Britain looks like, we need to be bold enough to keep testing public opinion."