KiwiRail's making it clear Government subsidies are set to be a permanent part of its business model.

The state owned operator currently runs at an annual loss on its books - an issue that's been the focus of questions at a parliamentary hearing today.

KiwiRail's chairman, John Spencer, says the commercial review they undertook revealed every configuration of running a rail network required an ongoing level of Government investment.

"Simply put, there is not enough demand for rail in NZ to generate the revenue to allow the company to be fully self sufficient."

Kiwi Rail has also announced plans to shrink its workforce, indicating around 300 jobs will go in the future.

The plans have been outlined at a Parliamentary hearing this afternoon.

Chief executive Peter Reidy says two years ago they had 4,200 staff, this year they'll have 3,700, and they'll get down to 3,400.

He says they're reducing the cost base in their business because, if they're to help New Zealand reduce the cost of its supply chain, they need to be competitive.

Mr Reidy says there's a business imperative to get more efficient and KiwiRail's not always been as efficient as it could be.

The days of rail carriages carrying freight on KiwiRail's inter-island ferries are also set to be numbered.

The company's looking at the way it shifts its freight across the Cook Strait as it looks to find savings in its operational costs.

Mr Spencer says it's almost impossible to get a rail compatible ferry around the world now, so the company has to pay the cost of doing that.

He says because they're leasing ferries the biggest cost is when you hand the vessel back, as you have to put it back to what it was.

Mr Spencer says they're now working on the basis of not having any rail compatible ferries at all.