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Following the British model, Australians generally assumed in the 1850s that railways would be built by the private sector. Private companies built railways in the then colonies of New South Wales, Victoria and South Australia. The first line opened in South Australia in 1854 as a horse-drawn line, while the first steam-powered line opened in Victoria a little later in 1854. The private railways were soon found not to be financially viable, and existing rail networks and their expansion was taken over by colonial governments. This also enabled railways to be developed to promote development, even if not apparently viable in strictly financial terms. The railway systems spread from the colonial capitals, except in cases where geography dictated a choice of an alternate port.

The colonial railways were built to three different gauges, which became a problem once lines of different systems met at Albury, New South Wales in 1881 and Wallangarra, Queensland in 1888. In the 20th century, the lines between major cities were converted to standard gauge and electrified suburban networks were built in Sydney, Melbourne, Brisbane and Perth. In the second half of the 20th century, many rural branch lines were closed to passenger traffic or altogether in all states. On the other hand, long heavy-haul railways were built to transport iron ore in Western Australia and coal in Queensland to ports.

Australia's first steam-powered railway was a suburban line opened from Melbourne to Port Melbourne in 1854. This line and almost all subsequent Victorian lines were built to broad gauge (Modèle:5 ft 3 in, gauge). In the following year New South Wales opened its first line standard gauge (Modèle:4ft8.5in) from Sydney to Granville in what is now Sydney's western suburbs. In the following year South Australia opened its first line (1600 mm gauge) from Adelaide to Port Adelaide. The three major Australian colonies at the time failed to follow advice from the British Government to adopt a uniform gauge in case the lines of the various states should ever meet. The original Irish engineer persuaded the New South Wales legislature to require that all railways in the colony be of the Irish broad gauge. Subsequently a Scots engineer persuaded the legislature to change to standard gauge. Unfortunately Victoria and South Australia had ordered broad gauge rolling-stock and refused to follow this change.

Queensland first line (Modèle:3ft6in feet gauge — known in Australia as "narrow gauge") from Ipswich to Bigges Camp, the first stage of a railway between Brisbane and Toowoomba, opened in 1865. This gauge was intended to save money and was subsequently followed by Tasmania and Western Australia. As a result, in the middle of the 20th century Australia had almost equal amounts of each gauge. Tasmania's first (1600 mm gauge) line opened in 1871 from Deloraine to Launceston and was converted to 1067 mm gauge in 1888. Finally, Western Australia opened its first Government-owned line in 1879 between Geraldton and Northampton. Lines spread in all the states from these first lines, connecting ports to farmland and ports.

The mainline systems of New South Wales, Victoria, South Australia and Queensland met (albeit with three breaks of gauge) in the 1880s. Only Victoria and South Australia shared a common gauge, and even so they opted to change engines at the border. The other mainland colony, Western Australia, was isolated by 2,000 km of desert. The first break of gauge was created when the New South Wales and Victorian lines met at Albury in 1883. The railways of Victoria and South Australia meet at Serviceton in 1887, but these lines were both broad gauge. In 1888 the railways of New South Wales and Queensland meet at Wallangara. Meanwhile, in 1889, the first line (1067 mm gauge) in the Northern Territory was opened from Darwin to Pine Creek. In 1915, a seven kilometre extension of the New South Wales Railways from Queanbeyan to Canberra was opened to create the Australian Capital Territory's first and only line.

New South Wales' railways were standard gauge lines built to connect the ports of Sydney and Newcastle to the rural interior. The first railway was built from Sydney to Parramatta Junction and after two decisions to change the rail gauge, problems in raising capital and difficulties in construction, the line was opened in 1854. The Main Southern line was built in stages from Parramatta Junction to the Victorian border at Albury between 1855 and 1881 and connected to the Victorian Railways at a break-of-gauge in 1883. The standard gauge connection from Albury to Melbourne was finally completed in 1962. Meanwhile, the Main Western line was built from Parramatta Junction line to the north west of the state, reaching Bourke between 1860 and 1885.

The Main North line was built from Newcastle to Wallangarra on the Queensland border and connecting with Queensland Railway's line to Brisbane at a break of gauge between 1857 and 1888. Sydney and Newcastle was finally connected in 1889. The shorter and single-gauge North Coast railway line between Sydney and Brisbane was completed between 1905 and 1932.

The last main line, the Broken Hill line was completed to Broken Hill in 1927, connecting with the South Australian Railways at a break of gauge. In 1970, the South Australian section was standardised, completing the Sydney - Perth standard gauge link. Meanwhile branch lines proliferated over the settled east of the state, including the Illawarra line to Wollongong and Nowra completed in 1893. In 1926 work began on electrifying Sydney's urban railways and connecting them together via new lines.

Victoria's first railway was a suburban railway opened by the Melbourne and Hobson's Bay Railway Company from Melbourne to Sandridge (now Port Melbourne) in 1854. This line and almost all subsequent lines were built to Modèle:5ft3in broad gauge. The Melbourne and Suburban Railway Company's line from Princes Bridge railway station to Punt Road (Richmond) opened in 1859. In the same year the Geelong and Melbourne Railway Company opened its line from Melbourne to Geelong.

Subsequently the Victorian Railways built new railways to connect farming and mining communities to the ports of Melbourne, Geelong and Portland. In 1862 lines reaches the great gold rush towns of Bendigo and Ballarat. In 1864 a line was opened to the Murray River port of Echuca. In 1883 the first connection with another State's rail system was made when a line was completed to the New South Wales Government Railways's station at Albury, requiring a break-of-gauge to New South Wales's Modèle:4ft8.5in standard gauge. In 1887, Victorian Railways met South Australian Railways at Serviceton, although both systems used broad gauge.

In 1919, electrification and development of the Melbourne suburban lines commenced. Minor extensions to suburban lines have continued, but patronage has fallen as road transport gained favour from the 1960s. In 1981, Melbourne's only underground railway, the Melbourne City Loop was opened.

On the country network, a large number of uneconomic branch line railways have been closed since the 1950s, leaving a skeleton network by the time of the Lonie Report of 1980. The main interstate links were finally standardised: Melbourne to Albury (connecting to Sydney) in 1961 and Melbourne to Adelaide in 1995.

Privatisation of the Victorian railway network was carried out by the Kennett Government in the 1990s, with freight, suburban and country rail services split into separate companies. This was later followed by the Regional Fast Rail project that saw track upgrades, new trains, and an improved timetable to major regional cities.

The first line opened in 1865 from Ipswich to Grandchester, a temporary terminus in the foothills of the Darling Downs. It was built to narrow gauge (1067mm — Modèle:3ft6in) in order to reduce costs through the steep escarpment.^[1]. This was subsequently applied to all the railways built in Queensland, except for the Brisbane-Sydney standard gauge line and the Weipa mining railway, both built in the 20th century. This was the first 1067mm railway in the world, but the gauge subsequently spread to Western Australia, South Australia, Tasmania, New Zealand, Japan, Indonesia, Southern Africa, Nigeria and Ghana among others. The line was extended from Grandchester to Toowoomba at the top of a steep climb in 1867 and was connected from Ipswich to Brisbane in 1876. From Toowoomba it was extended in stages to meet the New South Wales standard gauge line at Wallangarra in 1887 and to Charleville in outback southern Queensland in 1888.

Independent lines were commenced from the east coast ports of Maryborough, Bundaberg, Gladstone, Rockhampton, Mackay, Bowen, Townsville, Cairns and Cooktown. The central line opened from Rockhampton to Westwood in 1887 and reached Winton in central western Queensland in 1928. The northern line opened from Townsville to Charters Towers in 1882 and reached Mount Isa in 1929.

In 1888 the east-west lines began to be connected with the opening of the first section of the North Coast line to Petrie. It was not until 1924 that this line finally reached Cairns — Cooktown was never connected.

The interstate standard gauge line completed as far as Grafton, New South Wales in 1930 and Sydney in 1932. A mixed-gauge freight-only branch of this line was opened to the Port of Brisbane in 1995.

Many heavy haul coal lines were built in the late 20th century from the ports of Gladstone (beginning in 1968) and Hay Point (beginning in 1971). Electrification of some of the heavy haul coal lines commenced in 1986.

Finally an electrified rail system was developed in suburban Brisbane from 1979. Eventually the North Coast line between Brisbane and Rockhampton was electrified. This, together with the central Queensland mining railway, constitutes Australia's only significant rural rail electrification

The first railway in Western Australia was a private timber railway opens from Lockville to Yoganup, south of Perth. In 1879, Western Australian Government Railways opened a 1067 mm (3 ft 6 in) gauge to connect the copper mine at Northampton and the port of Geraldton. Subsequently lines also developed from the ports of Fremantle (the port of Perth), Bunbury, Albany and Esperance, mainly for carrying grain and minerals.

The line between Fremantle, Perth and Guildford (about 15km further east) was opened in 1881. In 1893, Perth was connected to the port of Bunbury, 175 kilometres south of Perth. In the following year the Midland Railway Company opened a line from Perth to Walkaway, which connected with the Government line to Geraldton, 424 km north of Perth. In 1896, the railway connected Perth to Kalgoorlie, where gold had been discovered in 1893.

In the 20th century, Perth was finally connected to the eastern states. In 1917, the standard gauge Trans-Australian Railway connected eastern Australia with the narrow gauge network at Kalgoorlie. In 1966, a new mixed standard and narrow gauge Eastern Railway route was completed through the Avon Valley, east of Perth. Finally, in 1968, the Kalgoorlie to Perth standard gauge line was opened.

The rationalisation of non-paying branch lines started in 1957, with the closure of many lines.

Commencing in the 1960s, a number of long distance heavy-haul railways have been built in the Pilbara region by major iron mining companies, particularly BHP Billiton and Hamersley Iron. New lines are still being built in this area, particularly to supply the booming Chinese market.

In 1986, the electrification of Perth suburban lines with a 25 kV AC overhead power supply commenced. The longest new line is currently under construction to Mandurah and is due to be opened in July 2007.

South Australia was the first colony in Australia to build a railway line. It was a horse-drawn tramway from the port of Goolwa on the Murray River to an ocean harbour at Port Elliot in 1854. It was later extended to a safer harbour at Victor Harbor. The first South Australian steam-operated line was built as a broad gauge (1600 mm) line in 1856 between the city and Port Adelaide stopping at Bowden, Woodville and Alberton. Gradually, a network of lines spread out from Adelaide, Port Wakefield, Wallaroo, Port Broughton, Port Augusta, Kingston SE, Beachport, Whyalla, Port Pirie and Port Lincoln. Some of these were built initially to carry ore, particularly copper. They later carried freight from the Murray River and grain from the broadacre lands.

All but the lines radiating from Adelaide were initially narrow (1067 mm) gauge lines. The first narrow gauge line was completed in 1870 from Port Wakefield to Hoyleton.

The first interstate connection was completed in 1887, when the South Australian and Victorian broad gauge railways met at Serviceton, Victoria. In 1888 a narrow gauge line was opened from Port Pirie to Broken Hill, New South Wales, with a connection at Peterborough to Adelaide. In 1927, this became an interstate link with the opening of the final leg of the Sydney - Broken Hill standard gauge line between Trida and Menindee.

The broad gauge line was completed from Adelaide to Terowie in 1880. The line north of Terowie was built as a narrow gauge line in stages to Peterborough in 1881, Quorn in 1882 and Oodnadatta in 1891. This was extended to Alice Springs by Commonwealth Railways in 1929, when it was renamed the Central Australia Railway.

The first standard gauge line in South Australia, Trans-Australian Railway, was completed in 1917 between Port Augusta and Kalgoorlie, Western Australia, requiring break-of-gauges at Terowie, Port Augusta and Kalgoorlie to reach Perth. This line was extended to Port Pirie in 1937 and the broad gauge line from Adelaide to Redhill was extended to Port Pirie, removing one break-of gauge. In 1970 the Port Pirie to Broken Hill standard gauge line was opened, completing the Sydney - Perth link. In 1982 Adelaide was connected to the standard gauge network at Crystal Brook, South Australia, near Port Pirie.

Meanwhile in 1980 the Tarcoola, South Australia to Alice Springs standard gauge railway was opened, replacing the narrow gauge line via Oodnadatta. It was extended to Darwin in 2003. In 1995 the Adelaide to Melbourne standard gauge railway was opened, completing the connections between the mainland capitals.

The first railway in Tasmania was a broad gauge (1600 mm) line opened between Deloraine and Launceston in 1871 by the Launceston and Western Railway. It quickly went bankrupt and was effectively taken over by the Tasmanian Government in 1872. In 1876 the Tasmanian Main Line Company opened a narrow gauge (1067 mm) line from Hobart to Evandale (near Launceston), connecting with an extension of the Launceston and Western line at a break-of-gauge. Further gauge confusion was added in 1885 when the Tasmanian Government built a narrow gauge line west of Deloraine to Devonport. This was resolved in 1888 by the conversion of the Launceston–Deloraine line to narrow gauge.

The Tasmanian Government bought the Tasmanian Main Line Company in 1890, creating the Tasmanian Government Railways. In 1901 the line to Devonport line was extended to Burnie, connecting with the Emu Bay Railway's line to Zeehan. Other branches were built but the Tasmanian system has always been small and unprofitable. It currently carries no regular passenger services and its freight services are not profitable without subsidies for the maintenance and upgrading of its infrastructure, which is currently controlled by Pacific National.

Off the networks constructed by the various government railways, there have been a variety of rail gauges:

• Cane tramways, mainly in Queensland are Modèle:2ft, but these carry very little through traffic so that the break-of-gauge is not a problem.
• Victoria had four short Modèle:2ft6in lines for general traffic
• Private timber tramways used a variety of gauges
• Private, isolated and heavy duty iron ore mining railways all use the standard gauge of Modèle:4ft8.5in
• Temporary lines at construction sites, such as the Modèle:3ft6in gauge railways used for the development of the national capital at Canberra between 1913 and 1927, including the original Parliament House

In the 19th Century, railways were created to enable agricultural and minerals traffic to be carried to ports for export, and to allow passenger and freight operations between colonial capitals and regional areas. Coastal shipping handled most passenger and freight traffic between the colonies. However, the problem of different gauges became apparent with the meeting of lines of the different systems at Albury in 1881 and Wallangarra in 1888.

In the 1890s, the establishment of an Australian Federation from the six colonies was debated. One of the points of discussion was the extent that railways would be a federal responsibility. A vote to make it so was lost narrowly, instead the new constitution allows "the acquisition, with the consent of a State, of any railways of the State on terms arranged between the Commonwealth and the State" (Section 51 xxxiii) and "railway construction and extension in any State with the consent of that State" (Section 51 xxxiv). However, the Australian Government is free to provide funding to the states for rail upgrading projects under Section 96 ("the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit").

The Australian Government has full responsibility for railways in the federal territories, although the Northern Territory's railway is now owned and operated by the private AustralAsia Rail Corporation and the only railway in the Australian Capital Territory, the Canberra-Queanbeyan railway is now operated by the Rail Corporation New South Wales.

In 1910, a conference of Railway commissioners chose Modèle:4ft8.5in to be the standard gauge. Over the decades, many plans were floated to fix the break of gauge. These failed, mainly because they were too ambitious and proposed to convert all lines, even lines of little economic value.

In the 20th century, the different state rail systems became more integrated, initially creating more breaks of gauge. In 1917, the Federal Government's standard gauge Trans-Australian Railway was completed between Kalgoorlie, Western Australia and Port Augusta, South Australia. However, this required a break of gauge at Kalgoorlie to reach Perth and breaks of gauge at both Port Augusta and Terowie to reach Adelaide. In 1927, the last section of the Sydney–Broken Hill line was completed meeting the South Australian Railways line at a break of gauge and requiring a further break of gauge at Terowie to reach Adelaide.

The Grafton Bridge over the Clarence River showing Bascule span lifted to let shipping through. (Postcard from about 1932; The "Southern Cross" aeroplane has been added to the photograph.)

In 1932 the first progress in reducing the gauge conflict was made with the completion of the standard gauge North Coast line from Sydney to Brisbane with the opening of a bridge at Grafton. In 1937 the Trans-Australian Railway was extended to Port Pirie and the broad gauge railway from Adelaide to Redhill was extended to Port Pirie, reducing one break of gauge between Adelaide and Perth, but creating a three-gauge railway station, until the standadisation of the line to Broken Hill and the Adelaide-Crystal Brook line.

In the 1950s, a parliamentary committee chaired by William Charles Wentworth IV recommended a much more modest and affordable plan to gauge convert the three main missing links:

• Albury (Sydney) to Melbourne - standard gauge track added parallel to broad gauge (completed 1962).
• Kalgoorlie to Perth - narrow gauge converted to standard (completed 1968).
• Broken Hill to Port Pirie - narrow gauge converted to standard (completed 1969).

A standard gauge line was built between Port Augusta and Whyalla in 1972. In October 1980, a new standard gauge railway was completed from Tarcoola, South Australia to Alice Springs, replacing the former narrow gauge railway. Standardisation between Adelaide and Crystal Brook, South Australia (connecting to the Sydney-Perth standard gauge line) was completed in 1982.

In 1962 the Albury to Melbourne standard gauge railway was opened, completing the standard gauge link between the two biggest cities, Sydney and Melbourne. In 1968 and 1969 the Kalgoorlie to Perth and the Broken Hill to Port Pirie standard gauge railway were opened completing the Sydney–Perth link. Adelaide was connected to the standard gauge network with the opening of the line to Crystal Brook, South Australia in 1982 and the Adelaide to Melbourne line was converted to standard gauge in 1995. Meanwhile, the Tarcoola, South Australia to Alice Springs standard gauge railway was opened in 1980 and extended to Darwin in 2004.

There have always been niches for private railways in most colonies, such as:

• mining - private iron mining railways alone now account for most Australian rail freight by tonnage, but private coal railways have been important since the ealy years of coal mining in the mid 19th century
• quarrying
• major factory sites, such as steel works
• temporary lines at construction sites
• agriculture, especially the sugar industry

Starting in the 1960s, four heavy duty railways were developed in the Pilbara region of the far north of Western Australia for the haulage of iron ore from several mines to the nearest ports. These railways are isolated from each other and from the national system, carrying no other traffic.

The very heavy traffic on these lines, up to 100 million tonnes per year, push wheel/rail technology to its limits, and has resulted in considerable research and development that has been of value to railways worldwide.

These iron ore railways are all 1435mm gauge, and started off using American standards for track, locomotives and wagons.

In 1992, the largely Federal Government-owned National Rail Corporation took over interstate rail freight operations from the Australian National Rail Commission, and commenced operations on the interstate network. National Rail Corporation's freight operations and rolling stock (not infrastructure) were combined with the New South Wales Government-owned FreightCorp and sold to Toll Holdings and Patrick Corporation as Pacific National in 2002.

The Australian National Rail Commission was privatised in 1997. Its Tasmanian operations and infrastructure (TasRail) were sold to Australian Transport Network Limited, which was taken over by Pacific National in 2004. South Australian branch lines were sold to Genesee and Wyoming Inc. Its passenger operations were taken over by Great Southern Railway.

State freight and country passenger operations were privatised, except in Queensland. Urban passenger trains remained in government ownership, except in Victoria, because such services are politically sensitive and these operations could not operate profitably.

New train operating companies (TOC) appeared, including wheat trains operated by wheat exporting companies. At least one company (Chicago Freight Car Leasing Australia) appeared to lease locomotives and rolling stock to any TOC that wanted them. These companies include :

• Australian Railroad Group
• Southern Shorthaul Railroad
• South Spur Rail Services
• Patrick Rail Operations
• Specialised Container Transport
• FreightLink
• Silverton Rail

Licensing of personnel with nationally recognised credentials facilitates the transfer of those people from one state or operator to another, as traffic demands.

Construction and maintenance of network infrastructure were consolidated into non-profit government bodies, in the case of the interstate network and the non-urban railways of New South Wales (Australian Rail Track Corporation) and Western Australia (WestNet Rail). This was intended to provide access to new and existing players.

The interstate rail network of the former Australian National Railways Commission was transferred to the newly established Australian Rail Track Corporation in 1998. In 2002, the Tarcoola-Alice Springs Line was leased to the AustralAsia Rail Corporation. The ARTC track consists of the track from Kalgoorlie to Broken Hill and Serviceton, Victoria. The ARTC also manages under lease the interstate standard gauge rail network in New South Wales and Victoria and has rights to sell access between Kalgoorlie and Kwinana to interstate rail operators under a wholesale access agreement with the Western Australian track owner and operator, WestNet Rail. It also "has a working relationship with Queensland Rail about the use of the 127 kilometres of standard gauge line between the Queensland border and Fisherman Island. ARTC intends to start discussions with Queensland about leasing this track once the NSW arrangements are bedded down".^[2] The ARTC also maintains the NSW rural branch lines under contract.

Other railways continue to be integrated, although access to their infrastructure is generally required under National Competition Policy principles agreed by the Federal, State and Territory governments:

• Queensland - Queensland Rail
• Tasmania - Pacific National
• Victorian non-interstate lines - Pacific National
• Western Australian non-interstate lines - Australian Railroad Group
• South Australian non-interstate lines - Genesee and Wyoming Australia
• Darwin-Tarcoola Railway - FreightLink

Much maintenance of tracks were contracted out.

While, the Australian Government has provided substantial funding for the upgrading of roads, since the 1920s, it has not regularly funded investment in railways except for its own railway, the Commonwealth Railways, which was established in 1911 to build the standard gauge Trans-Australian Railway between Kalgoorlie, Western Australia and Port Augusta, South Australia, and to take over the 1067mm gauge railways between Port Augusta and Oodnadatta (used by the old "Ghan") and the Palmerston and Pine Creek Railway. Commonwealth Railways became part of the Australian National Railways Commission in 1975, which was privatised in 1997. Although the Australian Government has considered the funding of railways owned by State Government to be a State responsibility, it has made loans to the States for gauge standardisation projects from the 1920s to the 1970s. From the 1970s to 1996, the Australian Government has provided some grant funding to the States for rail projects.

Under the Keating Government's One Nation program:

• the Adelaide to Melbourne line was converted to standard gauge in 1995.
• the 1067mm gauge line to the Port of Brisbane was converted to dual 1435/1067 mm gauge and extended in parallel with the duplicated passenger line to Dutton Park.
• a standard gauge link was built to the port at Fremantle, Western Australia.
• new standard gauge sidings were provided at Adelaide Outer Harbor.
• a separate freight line was built between Macarthur and Glenfield as the first stage of what is now known as the Southern Sydney Freight Line. Its planned extension to the Chullora - Enfield freight line near Sefton is being bult by the Australian Rail Track Corporation with funds provided by the Australian Government under AusLink.
• the Sydney - Brisbane line was upgraded with longer passing loops, the replacement of wooden trestles with concrete bridges, concrete resleepering, some minor deviations and bank stabilisation.
• passing loops were extended between Wodonga and Melbourne.

In 2004, the long awaited 1420 km Alice Springs to Darwin Railway was opened by the AustralAsia Rail Corporation with assistance from the Australian Government and the governments of South Australia and the Northern Territory. The Northern Territory expects that this railway line will open up many mining ventures that would otherwise be uneconomic without a heavy duty rail line.