Colluvial residual soils are widely spread in many parts of New South Wales. In hilly terrain, such soils are often subject to considerable erosion and shallow mass movement. Because of the coal mining and steel manufacturing industries, large amounts of by-products such as fly ash and steel slag are produced in New South Wales. This study looks at the benefits of utilising milled slag and fly ash for improving the engineering behaviour of erodible surface deposits (Werombi colluvium), and compares the performance with the conventional lime treatment technique. It is demonstrated that milled slag is very effective in terms of improving the internal friction angle of the treated soil, although it cannot compete with lime with regard to the increase in compressive strength. Fly ash is found to be useful as a void filler if used in substantial quantities, as it does not possess a self hardening (pozzolanic) nature to directly influence the time-dependent increase in strength and stiffness of the blended material.