The Government plans to spend an extra $250 million on KiwiRail in the next financial year.
If the company meets its performance measures it will get a further $500 million over the following two years.
Prime Minister John Key says the plan is to turn KiwiRail into a sustainable rail freight business within 10 years.
KiwiRail says its focus will be on improving the Auckland-to-Christchurch rail link, including increasing the amount of freight that can be carried on the inter-islander ferries.
Transport Minister Steven Joyce saying rail and coastal shipping will double in the next 30 years, and the extra funding will prepare KiwiRail for that expected freight increase.
However, some tracks are under threat. The company says it will consult communities about the future of lines in Northland, Stratford-Okahukura, Napier-Gisborne and north Wairarapa.
Labour Party transport spokesperson Darren Hughes says there should be enough money going into KiwiRail to ensure minor lines are not cut.
Mr Hughes says the Government is spending too much on roads compared with rail, and needs to change the balance.
ACT Party leader Rodney Hide says he opposes the decision to put more taxpayer funds into KiwiRail, but the Government has been left with little choice.
Mr Hide says huge amounts of money have already been poured into KiwiRail, and it will continue to cost significant sums of money to upgrade.
[audio:http://www.radionz.co.nz/audio/national/ckpt/2010/05/18/act_$250m_for_kiwirail_in_this_years_budget]Listen to more on Checkpoint
