New Zealand is to get its first new rail locomotives in 20 years.
But they will be purchased from China, not built in local railway workshops, which would have created jobs.
Infrastructure Minister Bill English said the Government has approved $115 million of spending on new carriages and locomotives for KiwiRail and the establishment of a small unit within Treasury to manage the next stages of its infrastructure programme.
Mr English said $75m would buy 20 new locomotives from China.
The first 10 locomotives are expected to arrive in April 2010 with the remaining 10 coming in August 2010.
They will boost productivity on key freight routes and allow KiwiRail to free up locomotives for Auckland metro passenger routes.
Another $39.9m will be spent building new carriages for the TranzScenic passenger routes to improve their profitability.
The work will be completed by KiwiRail's Hillside Engineering workshop in Dunedin and will begin in January next year, maintaining workshop jobs and providing work for hundreds of other suppliers.
The new carriages are being paid for out of an existing appropriation.
KiwiRail will borrow the $75m for the new locomotives.
The Rail and Maritime Transport Union had members on a team which visited China looking at locomotives and was keen on the option of building them locally from imported parts.
"The Government was elected with a mandate to fix the infrastructure problems holding New Zealand back and to target projects that will help us build a higher performing economy," Mr English said.
KiwiRail has 149 locomotives and the youngest is 20 years old.
The average age of the wagons is between 25 and 30 years and most have an axle load of 14 tonnes, according to a briefing to the incoming government.
KiwiRail said $14 billion has been spent on state highways since rail was privatised in 1993.
The document detailed $2b of necessary investment as KiwiRail sees it.
It broke down to $700m on so-called above rail assets, including locomotives, wagons and ferries, and $1.363b of investment in so-called below rail, essentially the network itself.
The National Infrastructure Unit within Treasury aims to ensure that the Government's infrastructure programme is strategically sound and helps build a more competitive, more productive economy.
The unit will be drawn largely from Treasury staff and resources and staff seconded from other departments.
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