The news that the government didn’t warn the South Koreans that we were about to cancel the Cook Strait Ferry contract didn’t surprise me as I’d already given Nicola Willis an A for arrogance over the deal.
The finance minister’s statement that she was cancelling the contract because of a cost over-run of $1.47 billion came out of the blue. What destroyed the credibility of the announcement was that it was made at a similar time to her giving tax breaks to landlords of $3bn.
The Cook Strait ferries carry livestock and produce vital for rural NZ. They also carry supplies, people and vehicles between the North and South Island. They are, in my view, a vital part of New Zealand’s infrastructure.
We now have a “Ministerial Advisory Group” created by Minister Willis to advise of future options. Other than the more hui than do-ey that National accused the previous government of, I’ve found that ministers create such groups to give them the answers they want.
At this point those answers appear to be privatising the ferries and not having a rail capability, which in my view is crazy.
While I admit that KiwiRail is a disaster, I don’t want it privatised yet again. What I do want is an efficient and focused organisation, which doesn’t currently exist.
Considerable cost had already been committed, $424 million with the ferry orders’ cancellation estimated to cost at least another $300m. That’s $724m of taxpayer dollars wasted.
The issue wasn’t just the ships but the onshore infrastructure, including $250m for “seismic costs”, which was a government requirement for a one-in-500-year event.
The Picton wharf has a maximum life of three years with the Wellington facility in a similar state. They’re still going to have to be upgraded, new ferries or not.
Rail was a large factor with the cost increase and I support the Cook Strait ferries being rail capable. Internationally there has been a “renaissance with rail”.
Considering the original contract, we had two ferries purpose-built for Cook Strait. They had powerful electric motors, which has become the industry standard for new ships. Hyundai was contracted to build them. It has been described as “the best ship builder in the world”. The ferries had a reduced wash, which was important to those living in the Sounds.
I would have described the original ferry proposal as an investment in long-term infrastructure, vital for New Zealand. They transport $14bn in freight and carry 850,000 passengers annually. KiwiRail was awarded a $350m green loan that has since been revoked because of the cancellation.
Where has that left us? Our old ferries are a shower and subject to breakdown. The Kaitaki lost power in Cook Strait in January 2023 with 800 people on board. It was fortunate no one was killed. More recently Aratere ran aground in Picton as a result of steering failure.
The government is suggesting smaller ferries as a replacement. There are just 22 such boats in the world today, with none for sale. Getting a boat will take at least four years, The new ferries could have been here by the end of 2026.
There is considerable discussion that the cost will be little different from the purpose-designed ferries, which becomes farcical. The Ministry of Transport warned the government that the current ferries had a two-year life. The problem is we are now at the back of the queue for new boats.
We read that supply chains need “a reliable, safe, efficient, cost-effective transport system”. We don’t have that with the old ferries.
Ian Braid, the managing director of Mainfreight, told NBR that “Cook Strait was not just a piece of water but an extension of State Highway 1 connecting both islands”. He added that he was “worried about the government’s naivety in making decisions about the route without consultation with key customers of that supply chain”.
His points are valid.
My frustration is with one government committing to a commercial deal, with a new government cancelling the deal for what in my view were spurious reasons.
The reality is that the new ferries would have cost as much as the four new surveillance planes for the NZ Defence Force. If the prime minister wants a new 757 plane, they will cost over US$100m each with annual running costs estimated at US$7m. Replacements for the ferries could cost as much as the disbanded project.
As for cost increases, Transmission Gully was a National Government initiative that went on forever and came in at 40% over budget.
The loser in the current shambles is the taxpayer and the farmer. Korea is our sixth largest trading partner, valued at $8.92bn. The Ministry of Foreign Affairs and Trade did advise the government that cavalier cancellation of the ferries involved “a risk to NZ’s reputation in Korea”.
We don’t need that.
