Stakeholders across the region were pleased to hear the private sector would be approached to build the Maldon-Dombarton rail line.
Cunningham MP Sharon Bird has campaigned for the line to be built for almost a decade.
"I am very pleased to hear that the NSW government is approaching the private sector in an effort to get the rail line built," she said.
"This is in stark contrast to the Abbott government who recently ripped $50 million of seed funding for the Maldon-Dombarton line from the budget."
Throsby MP Stephen Jones said the rail line would have flow-on effects for rail commuters as well.
"The rail link will mean fewer freight trains on the South Coast line which will then take the pressure off the commuter rail line," Mr Jones said.
University of Wollongong rail expert Philip Laird said the cost to build the line would be so high that he expected some public funds to be contributed.
But he said it would be an investment that would pay off in spades.
"It would be very good value to get most of the freight trains off the Sydney-Wollongong line and it would be an easier path for coal trains from not only Tahmoor but also the western coalfields of Lithgow. The coal trains would have an easier path down to Port Kembla."
It wouldn't just be those interested in moving freight in and out of the port who would benefit from the rail line's construction, he said.
"It wouldn't remove all freight trains from Wollongong to Sydney but it would remove many of them and it would allow for more train paths for more passenger trains and for faster passenger trains."
Illawarra Regional Information Service CEO Simon Pomfret said the rail link was the "number one priority" for the region.
"It's going to be an important transport link for Port Kembla to Sydney, particularly with the extension of the port," he said.
The South Coast Labour Council also cautiously welcomed the announcement.
"We haven't seen details of it, but the fact that they're showing an interest is a positive," SCLC secretary Arthur Rorris said.
"The only effective way to do that is to complete the link and to separate as much freight as possible from our existing line and that will also make the freight links more efficient. I think you can't really talk about infrastructure development without addressing this."