The Interislander ferry Aratere leaving Wellington. Photo: RNZ / Rebekah Parsons-King
Unions are calling on the finance minister to resign after making a "fast and loose" call to deny further funding for the Interislander upgrade project.
KiwiRail had requested an additional $1.47 billion for the Inter-Island Resilient Connection (iReX) project. Some of it had been agreed to in-principle by the previous government, to address cost escalations related to associated harbourside infrastructure in Wellington and Picton.
It would have enabled KiwiRail to launch two new rail-enabled ferries by 2026, replacing its troubled existing vessels. The new, larger ships would be able to take trains on board, making trips across the Cook Strait more efficient.
But on Wednesday, new Finance Minister Nicola Willis said ministers were concerned about the cost blow-out of the project, which had nearly quadrupled from $775 million to about $3 billion since 2018, and canned it.
She said only a fifth of that spending was allocated to much-needed new ferries, and Kiwirail was effectively paying for a "Ferrari… and now we're going to go off and see whether there are any good reliable Toyota Corollas available" to cut costs.
"Furthermore, agreeing to KiwiRail's request would reduce the government's ability to address the cost pressures that are impacting on New Zealanders, fund other essential projects and get the Crown's books back in order."
But even if the project continued, it would not have jeopardised the government's tax cut plans, Willis said.
Nicola Willis Photo: RNZ / Angus Dreaver
The Maritime Union of New Zealand (MUNZ), the Rail and Maritime Transport Union (RMTU), the New Zealand Merchant Service Guild and the Aviation and Marine Engineers Association on Wednesday evening issued a joint statement, calling for Willis to step down.
"This is far more than a fiscal decision - this decision shows poor judgement and a total lack of understanding of the importance of a functioning Cook Strait connection to New Zealand's supply chain," MUNZ national secretary Craig Harrison said, saying the decision was made in a "fast and loose" manner, despite its implications for the economy.
"The can has been kicked down the road for years and the upgrade has to happen now."
He said the decision jeopardised "the future of road and rail transport between the North and South Island".
RMTU general secretary Todd Valster called the decision "reckless", throwing away a "long-term solution for the Cook Strait over decades, which justified the cost of the project".
"The iReX project would deliver fit-for-purpose, modern vessels and terminals, that would provide reliability, resilience, low emissions and a safe service."
He said the cost of breaking contracts with international suppliers would be in the millions. Construction of the two new ferries in Korea had not yet started.
Digital image of how the new ferries would have looked. Photo: Supplied / KiwiRail
KiwiRail chairperson David McLean said an alternative long-term solution could take years to develop. In 2019, when the project was announced, KiwiRail said there was little difference in the price of a new rail ferry and a new non-rail ferry.
Marlborough Mayor Nadine Taylor said she was shocked and disappointed by the news.
"This will come as a particular shock to the Picton community who are most directly affected by this decision. The town has been very engaged in the new ferries project and have been a great supporter of it.
"A large number of workers had been expected to work on the iReX project over the coming years."
The mayor wanted to talk with the new government about what the future could look like in terms of inter-island infrastructure.
"There is no doubt that we need to invest in this national transport connection for the long term. The question now is how and when we will do that."
The scrapping of iReX had guarded support from Ia Ara Aotearoa Transporting New Zealand, a lobby group for road freight transport companies.
Interim CEO Dom Kalasih said it was "good that KiwiRail is being held to account", but noted the cost of the project needed to be seen in the context of how much freight crossed the Cook Strait each year - up to $20 billion.
"Improving the resilience and capacity of the ferry service is important, but we also believe that there is a lot of scope for all the stakeholders affected, including freight operators to work with KiwiRail to find a workable, more affordable alternative".
He said the government and KiwiRail now had to "provide clarity about how a safe and resilient Cook Strait service is going to be achieved".
In an earlier statement, Willis said ministers, including State Owned Enterprises Minister Paul Goldsmith, would engage with the board and officials about alternative options.
The government remained committed to a "resilient safe and reliable Cook Strait connection", Willis said.
"In the meantime, we expect KiwiRail to continue focusing on providing a reliable ferry service and to prioritise existing services appropriately."