KiwiRail plans to replace its ageing locomotives in the South Island and assemble wagons locally after being voted $1.3 billion for rail in the Budget, says chief executive Greg Miller.

He said the investment would mean work for 600 contractors, create 200 jobs for the state-owned rail company and meant money going back to the regions to help New Zealand recover from the economic impacts of Covid-19.

"KiwiRail has already replaced its ageing North Island locomotive fleet, and this latest tranche of funding will fully cover the cost of replacing our South Island locomotives, many of which are more than 40 years old, and purchasing new electric shunt locomotives."

Miller said the money would also allow KiwiRail to build a new hub for maintaining South Island rolling stock at Waltham in Christchurch and build a new facility at Hillside Workshops in Dunedin to assemble wagons in New Zealand.

"This is an outstanding level of investment from the Government which is truly revitalising rail for New Zealand," said Miller, adding it built on $1.2b for rail in last year's Budget and $1b in 2019.

Of the $1.3b for KiwiRail, $810m came from increased infrastructure investment, which Infrastructure Minister Grant Robertson said has risen from $42.4b over four years at the start of this parliamentary term to $57.3b.

The extra money for KiwiRail was criticised by the Taxpayers' Union, which was particularly damning of plans to build rail wagons in New Zealand.

The homegrown rail wagons, said spokesman Jordan Williams, was a "return to a 1980s 'Polish Shipyard' economy".

Miller said KiwiRail will be taking on around 200 more employees for ongoing
track maintenance and renewal work across the country and wagon assembly at Hillside and committed to 10 per cent of new staff being apprentices or trainees.

A further 600 contractors will be needed to upgrade and build new facilities, particularly in the South Island, he said.

KiwiRail spend

$722.7m over six years to complete the purchase of essential new mainline locomotives, shunt locomotives and wagons, to replace those which are at the end of their usable life; complete upgrades to maintenance facilities which are no longer fit for purpose.

$449.9m top-up to the National Land Transport Fund over two years to fund the first three years of a 10-year plan to raise NZ's rail network to a resilient and reliable standard.

$87.3m final instalment of working capital for Core Asset Management over three years to ensure core freight, tourism, and property assets can be maintained until new rolling stock/ferries/facilities are operational.

$85m over five years to build wagon assembly facilities at Hillside Workshops on top of the previous $20m Provincial Growth Fund investment to upgrade the existing maintenance facility at Hillside.