Rail was one of the big winners in the Budget, with $1.41 billion allocated to KiwiRail over the next two years.

Finance Minister Grant Robertson said in his Budget statement the KiwiRail funding will be spent on "modernisation". Regional rail, new engines and new track are each in line for extra spending in excess of $300 million.

$741 million of the money will come directly from transport funding, with the remaining $300 million to be sourced from the Provincial Growth Fund (PGF).

Details have not yet been revealed, but Deputy Prime Minister Winston Peters will be in Whangarei on Friday night for what's being billed as a major new rail announcement. He's expected to reveal a new rail link will be built to connect Northport, at Marsden Point, with Whangārei.


That line would eat up most of the Budget's allocation to regional rail and would be the first step to establishing Northport as a strong regional port – one that could be capable of receiving the car imports currently landed at Auckland.

KiwiRail CEO Greg Miller said the Budget "builds a solid foundation for the future of rail in New Zealand".

He called the level of investment "outstanding" and "a clear recognition of the value rail can add to New Zealand's transport system".

Miller said: "We know that rail, with 66 per cent fewer emissions per tonne of freight carried than trucks, has a key role to play in reducing New Zealand's transport emissions, relieving congestion on our roads, improving road safety and connecting our communities."

However, National's transport spokesperson, Paul Goldsmith, said, "It's hard to believe the key initiative in 'Transforming our economy' is further subsidies for rail. Meantime, since coming in the Government has stopped a dozen or so major transport projects and started no new ones. Frustrated commuters will saddened at the Government's perverse priorities."

Brett O'Riley, chief executive of the Employers and Manufacturers Association, described the funding as being "largely to fix things up". He didn't think there would be much dispute about the need to do that, but noted there has been no announcement yet on how Auckland freight will be impacted.

A spokesperson for Ports of Auckland said it wasn't possible to comment without knowing how the money would be spent.

Transport Minister Phil Twyford called the funding for rail the first step in rebuilding "the backbone of a sustainable 21st-century transport network".


He said a long-term national rail plan would be developed later this year.

"Our goal is to have a stronger rail network that sees more freight moved by rail and fewer heavy trucks on our roads, as well as better public transport options to give commuters choice."

The Budget also confirmed the Government would meet its half share of the extra $1 billion of costs expected for completion of the City Rail Link. This follows Auckland Council's commitment of a similar amount and was anticipated.