"There definitely is a good future for passenger transport in this region if the Government is prepared to pick up the capital cost," Taieri Gorge Railway chief executive Murray Bond said when contacted yesterday.
He was responding to the Government spending $655 million to buy back the rail and ferry business from Toll New Zealand, with settlement on June 30.
When the Southerner rail service ended, it was carrying an average of 72 passengers a day between Dunedin and Christchurch, which was not enough to sustain the service, Mr Bond said.
However, Taieri Gorge had been investigating the use of light rail cars between Dunedin, Palmerston and Oamaru.
The Government could use similar rail cars for the extended service.
Luxury rail-car sets were available overseas, were not overly expensive and could be reintroduced on main routes, he said.
"Every day we are asked by people wanting to travel to Christchurch by train and I tell them government policy encourages road transport. That philosophy must change now the Government will be the owner. If the Government looks after the capital cost, someone can make a profit from a rail service."
Owning the rail network, as well as the rail and ferry business, would let the Government decide how best to "grow" the rail business, Mr Bond said.
Otago Chamber of Commerce chief executive John Christie said an integrated road, rail, air and port network was critical to a well-functioning economy.
Since the demise of the Southerner the economy had changed. Air fares and fuel prices had risen and the attitude of people towards using public transport had become more positive.
"Delays in shifting people and freight cost time and money. You only have to look at the cost to Auckland of vehicles sitting in traffic gridlocks. There are lots of opportunities now the Government has the rail and ferry network again."
Green Party co-leader Jeanette Fitzsimons said strengthening the freight network should come first to help build a viable rail network.
"Once the Government has invested in the infrastructure and freight can be moved off the road, then we can develop new passenger services."
The passenger rolling stock had been run down and "cannibalised", so new stock would be needed.
That was not cheap to buy, she said.
People cared about how long it took to travel from point to point. Having a top-class system would allow faster rail travel.
As air fares kept increasing, along with fuel costs, travelling by rail would become cost-effective for many, Ms Fitzsimons said.
A statement by Prime Minister Helen Clark and Finance Minister Michael Cullen focused only on the freight aspect of the deal.
Miss Clark said modernising the transport sector was central to transforming the economy and making it sustainable.
"A modern rail system can lessen the carbon footprint of our wider transportation network, taking pressure off our roads and allowing out trucking and shipping businesses to operate more efficiently.
"Combined with an increase of almost 1100% in public transport investment since 1999, today's announcement marks a major step forward in building a truly sustainable transport network."
Dr Cullen said the selling off of the public rail system in the early 1990s, and the running down of the asset afterward, had been a painful lesson for New Zealand.
"In the months ahead, I will explore options for significant investments in new, modern rolling stock. These will be presented to Cabinet and full details will be made available as soon as possible," he said.
