The Government this year announced funding of $115 million for 20 new locomotives and 17 passenger carriages for KiwiRail's Tranz Scenic fleet.
However, the 20 new locomotives were coming from China, Mr Mallard said in an interview after a visit to the Hillside workshops.
While at the workshops, in Dunedin, he noted several refurbished carriages for the Auckland Metro line were sitting awaiting bogies to arrive from China.
"In my view, there is nothing there that couldn't be built at Hillside. In a parallel way, the 10 new locomotives being imported immediately, and the remaining 10, could be built there."
The Woburn workshops were in Mr Mallard's electorate.
The former state-owned enterprises minister said that the first few locomotives would be more expensive to build than import and that it would take time to get the systems in place.
However, building them in New Zealand would create jobs, get people off the dole and because the locomotives were built in New Zealand, the long-run maintenance costs would be lower.
"Skill development is something we have to do. It has been traditional for railways to be a major skill developer."
There had been a tradition of rivalry between Hillside and Woburn, but the two workshops were just about through that, Mr Mallard said.
The management of both workshops were meeting regularly, as were union representatives.
Both workshops had skills the other one did not have.
Working together would give an added strength to KiwiRail, he said.
Asked what he could do as an opposition MP to get the building programme started, Mr Mallard said the main thing he could do was join with Ms Curran and lobby hard for it to happen.
Informally, the MPs would talk to everyone they could about the idea.
Mr Mallard said he knew the board had the issue on its table as the last Labour government had introduced the idea before the election.
"In a funny way, having a recession should be helpful to us making the decision of doing things in New Zealand rather than exporting jobs.
"There will be more support for being New Zealand-centred rather than being purely free market."
The project to build rolling stock in New Zealand, rather than import it, had to be thought about in the longer term rather than over the next two years, he said.
