Victorian Premier John Brumby and Commonwealth Infrastructure and Transport Minister Anthony Albanese turned the first sod on the Wodonga Rail Bypass project on Friday, the first major works in the North-East Rail Revitalisation Project.
"We are taking action to ensure our regional communities are well-equipped to grow and thrive and the Wodonga Rail Bypass project will create new jobs and drive new investment in this already dynamic regional city," Mr Brumby said.
"Removing the rail line from the centre of Wodonga will open it up to major commercial opportunities, rejuvenate the city centre and is central to the urban development of Wodonga as a vibrant regional hub."
The start of work follows months of negotiations between the Commonwealth and Victorian governments.
The Wodonga Rail Bypass project is the first major step in the $501.3 million North-East Rail Revitalisation Project.
The North-East Rail Revitalisation Project will construct a rail bypass of Wodonga and convert 200-kilometres of broad gauge track to standard gauge to deliver a first-class passenger and rail link between Australia’s economic hubs, Melbourne and Sydney and improved passenger rail services between Melbourne and Albury-Wodonga.
Mr Albanese said the freight route between Melbourne and Sydney was Australia's busiest with freight volumes forecast to increase by 70pc in the next 20 years.
"New rail freight infrastructure gets goods to markets more efficiently, helping to alleviate the capacity constraints on our economy," he said.
"When this investment program is complete, train travel times between Melbourne and Sydney will be slashed by 20pc from 13 hours and 30 minutes to just 10 hours and 40 minutes.
"The five-kilometre Wodonga rail bypass alone will cut 10 minutes off an interstate train trip.
"It will also improve safety for the community by removing 11 level crossings in the centre of town."