Up to $10 million will be spent planning to extend the federal government's Inland Rail project through Queensland.
A business case will be developed to extend the project 646 kilometres from Toowoomba to the Port of Gladstone.
Deputy Prime Minister Barnaby Joyce says this will make it easier for Australian businesses to access import and export markets.
"The Inland Rail will enhance economies at the bookends of Brisbane and Melbourne," he told the National Press Club on Friday.
He said a key benefit would be generating more white-collar jobs such as engineering and planning in regional centres.
Inland Rail is the largest transport project in the government's $110 billion infrastructure plan.
It is intended to span 1700km, connecting Melbourne and Brisbane via regional Victoria, NSW and Queensland.
Labor transport spokeswoman Catherine King said the decision reflected a recommendation in a recent Senate inquiry report.
"Today's announcement is the first time that the government has acknowledged any of the report's 26 recommendations, and it comes after considerable advocacy from Labor senators and candidates, local councils and the broader Gladstone community," she said.
"Incredibly, the Morrison-Joyce government still has no plan where Inland Rail will start, where it will end, the route it will take or how it will interact with existing stations up and down the country."
She said it also needed better cost planning.
Mr Joyce also announced the government will move the North Queensland Water Infrastructure Authority from Canberra to Bowen in north Queensland.
It will locate the authority near the proposed Urannah Dam.
"North Queensland is also where we will start on the long-term nation-building task of expanding irrigated agriculture by moving a portion of the abundant resource of water west," Mr Joyce said.
