The Bland Report of 1972 recommended the restructuring of railway management, the closure of uneconomic branch lines, and the replacement of most country rail passenger services with road coaches.
By the start of the 1980s, passenger numbers had fallen to around 3 million per year, due to ageing rolling stock, unattractive timetables operating at poor frequencies, and the attractiveness of private motoring.
Reiher's lobbying had resulted in a $115 million commitment from the Hamer Government to revitalize country rail passenger services in Victoria, the concept of which originated within the Planning Branch of VicRail.
As of February 1981, the initial elements of the 1981 New Deal included: The new timetables were fairly successful, with adjustments made as the engines proved better timekeeping with lighter loads and as the fixed-set policy simplified shunting at Spencer Street station.
An alternative, cheaper proposal was to rebuild the DRC's electrical systems, and to replace other railmotor rosters with T class locomotives and refurbished Harris carriages.
[3] Further improvements were carried out under the Cain Government from 1982: By April 1983, the proposals to rebuild the DERM fleet had been dropped, and instead four 60 ft Harris carriages were to be rebuilt to complement the DRCs.
The passenger network was recast, with Intercity routes from Melbourne to Albury, Bairnsdale, Bendigo, Dimboola, Mildura, Numurkah, Swan Hill and Warrnambool.
Unlike the Regional Fast Rail project of the early 2000s, no track or signalling improvements were carried out in order to speed up the services.
Instead 35 little used stations were closed to passenger traffic, sectional running times were revised, higher powered locomotives allocated to services, and stops at railway refreshment rooms removed due to the introduction of on train catering.
Passenger train operations were revolutionised, with fixed consist working (as in Europe) introduced to eliminate the need to shunt between services.
The October 1981 timetable required a handful of the older railmotors to stay in service, with two of the unreliable Tulloch DRC and four of the worn-out DERM types.
Around this time, the expectation was that by end of 1983, all country services would be provided by steel airconditioned carriages and a small fleet of railmotors and EMUs.
By April 1983, VicRail General Manager R. J Gallacher claimed that country passenger traffic had increased by around 20% in the eighteen months since the New Deal had begun.
[5] By 1989 the strong growth in Interurban travel had led V/Line and the Government to look at the need to acquire further rolling stock, deliberations that would ultimately result in the introduction of the 130 km/h (81 mph) Sprinter railcar.