A parliamentary inquiry will examine confidential cabinet documents which reveal the NSW government rejected advice about a light rail route into Newcastle in favour of one that may cost about $100 million extra and gives more opportunity to property developers.

The NSW upper house inquiry, into planning in Newcastle, may also consider what influence disgraced former local Liberal MP Tim Owen had in the decision after further revelations that the documents were found in his vacated electorate office.

NSW Premier Mike Baird, centre, with Maitland candidate Steve Thomson, Newcastle candidate Karen Howard and Transport Minister Gladys Berejiklian in Newcastle on Tuesday. Credit:Peter Stoop

On Tuesday, Fairfax Media revealed that Transport for NSW advised the cabinet infrastructure committee in December 2013 that its preferred light rail route was along the corridor for the heavy rail line that was to be ripped up as part of a Newcastle revitalisation plan.