The recent history of Australia’s regional railways indicates a degree of government policy inertia, constrained by our system of governance as well as reliance on competition as a solution to inefficiencies in transport. The approach taken by governments to reforming regional railway systems was placed under the same blanket of competition policy-derived measures: creating competing businesses by way of privatisation and “open access” to tracks, or at least allowing competitors for the government’s operator, in the case of Queensland, onto the states’ tracks. An inquiry into the condition of Victoria’s regional network has indicated that, at best, this approach has been inadequate. During 2008, the NSW Government implicitly acknowledged the shortcomings of competition-dependent policy by restoring some assets to public ownership. It also appears that insufficient consideration was given to the spatial arrangement of the main line and regional systems, which, in the light of experience in Canada and the USA, appear to be better treated separately due to different conditions and constraints on branch lines, and the greater productivities available on main lines. Following some analysis of the branch line system of NSW, this paper attempts to propose that a political/geographical analysis in company with the basic economics of railway operation would point towards different plans for branch and main line systems, and avoid the conditions now threatening regional freight railways. Such plans should be accompanied by a different approach to regional-central government relations and reconsideration of Commonwealth, state and local government roles in regional transport development. This paper mentions the recent history of local-central government relations in Australia, highlighting the present difficulties faced by local interests in developing rail services for local industrial development. It places regional transport issues in that context before suggesting some ways to give greater certainty to sustainable transport options, both passenger and freight, for regional Australia.