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What Premier Kristina Keneally said about Newcastle rail debate

PREMIER Kristina Keneally says state cabinet will soon be discussing the Newcastle rail issue again but she is yet to be convinced on the merits of cutting the line.

After meetings with the community-based Save Our Rail group and the Jeff McCloy-backed Fix Our City group, Ms Keneally said she could see the arguments from both sides.

"I want to be sure we are not cutting off our nose to spite our face when it comes to the rail line," Ms Keneally said.

On her first official visit to the region after dropping in to John Hunter Hospital on Christmas Day, Ms Keneally also confirmed her doubts over the proposed Tillegra Dam, saying the need to bolster the Hunter's water supply needed to be balanced against the environmental costs of such a dam.

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