Australia has unveiled a $1.1bn project to upgrade the rail corridor between North Strathfield and Sydney’s northern suburbs to Newcastle, paving the way for the next stage in the modernisation of the Interstate Rail Network.

After about three years of detailed planning and preconstruction activities, the New South Wales (NSW) Government and the Commonwealth signed the intergovernmental agreement.

The Northern Sydney Freight Corridor Upgrade will build a rail freight underpass at North Strathfield, lay a third track between Epping and Pennant Hills, install new passing loops near Gosford and construct a holding track at Hexham.

New passing loops and new track will reduce the impact of freight trains on passenger services, providing locations for passenger trains to overtake slower freight trains as well as improve the reliability of passenger trains.

Federal Infrastructure Minister Anthony Albanese said that, at present, Sydney is the biggest bottleneck on the main line between Melbourne and Brisbane.

"Once completed in 2016, the new infrastructure will lift the corridor’s carrying capacity by 50% from 29 to 44 freight trains a day, helping to accommodate the threefold increase in interstate freight volumes that’s expected over the coming years," Albanese said.

Currently, freight trains and passenger services heading north out of Sydney share the same line.

The Northern Sydney Freight Corridor Upgrade project will speed up the movement of freight trains through Sydney, and expand track capacity along the 160km-long corridor.

The upgrade is expected to reduce annual carbon emissions by more than 100,000tpa and take about 200,000 trucks a year off the state’s roads and improve the reliability of passenger trains.

The project will also reduce travel times for commuters travelling into the city from the Central Coast and the Hunter.

The Federal Government will allocate $840m for the project, while the NSW Government is contributing $214m.

Work is expected to commence in February and be completed in 2016.