The federal and New South Wales governments will jointly fund a $7bn north-south rail link to connect Badgerys Creek airport to Sydney’s rail network at St Marys, Malcolm Turnbull and Gladys Berejiklian have announced.

The rail link is part of the western Sydney city deal unveiled by the two Coalition leaders in Sydney on Sunday, along with $150m for parkland facilities and plans for an “aerotropolis” business park at North Bringelly.

The prime minister told reporters that “the objective is to have the rail open and operating when the airport opens” in 2026, describing it as part of the government’s commitment to nation-building infrastructure.

“The commitment is to build it as partners, to fund it 50-50 and we have substantial resources already budgeted for rail,” he said.

The full text of the city deal omits the cost of the railway, an estimate for which was provided by the prime minister’s office.

Both governments have committed $50m each to develop a business case for the rail line and to finalise a route and station locations.

Turnbull suggested value capture could help pay for the rail project, the cost of which is expected to top $15bn when it is connected to Campbelltown and Leppington in Sydney’s south-west.

The rail line is designed to meet the goal of putting western Sydney residents within 30 minutes of up to 200,000 jobs to be located at North Bringelly.

Connection to Sydney’s central business district will take much longer, above the current commute time of one hour between St Marys and Central station on the western line.

The NSW government will also establish rapid bus services from the metropolitan centres of Penrith, Liverpool and Campbelltown to the Badgerys Creek aerotropolis and to Western Sydney airport before it opens.

The Badgerys Creek aerotropolis, part of which will include commonwealth land at North Bringelly, is a metro area adjacent to the western Sydney airport zoned for manufacturing, research, medical, education and commercial activities.

The project will be overseen by an Aerotropolis Development Authority and the NSW government will establish an Investment Attraction office in Liverpool to encourage businesses to the area.

Turnbull said that the western Sydney city deal represented a “different approach” to planning because the two governments would “put the plans and the infrastructure in first”.

“For too long we’ve been allowing development to proceed in a relatively unplanned way and then people say ‘oh dear we don’t have the infrastructure we need, the rail we need’.”

Labor’s shadow infrastructure spokesman, Anthony Albanese, said Labor welcomed the rail project which he said was first proposed by Labor in March 2015 and federal Labor has already committed to funding.

“Federal and state Labor have long argued for a western Sydney rail link with a north-south line to boost productivity and improve the quality of life of residents of the region,” Albanese and the state Labor leader, Luke Foley, said in a statement.

The pair called on the Coalition to commit to link the rail line to the Macarthur region and extend it to Rouse Hill in the north-west and commence construction as soon as possible.

Western Sydney, with a present population of about 2 million people, is expected to add another million by the early 2030s, a scoping study released with the plan reveals.

Transport woes plague the region, due to a lack of connectivity on train lines and congested roads, the report’s researchers found. About 300,000 residents commute outside western Sydney for work.