A ministerial advisory group has reported back to the Government behind closed doors on future options for Interislander.
OPINION
One of the biggest calls that the new Government made came in its first few weeks: the repudiation of the contract with a South Korean dockyard for replacement Interislander ferries.
Now a decision on how to secure the future of the Cook Strait ferries looms as one of the most important decisions that the Government will take during the course of this parliamentary term – a fact that didn’t need any further reinforcement, but was certainly underlined by the running aground of the Aratere in June.
As the weeks go by without clarity on the future of the Cook Strait connection, there has been mounting uncertainty for both the businesses who rely on a resilient supply chain between our two islands, and for families who entrust their safety to our increasingly worn fleet of ferries.
New Zealand has an unavoidable strategic national interest in an efficient and resilient Cook Strait crossing. A reliable freight connection between the North and South Islands on the main trunk line is crucial for keeping prices down for consumers and ensuring resilience in our supply chains.
As we look to decarbonise our transport networks and bring down the cost and impact of freight, it is also hugely important that there is a clear strategy linking up our rail systems with our national infrastructure around the ferries.
The current boats are near their end of life. There now seems to be broad agreement that there are no suitable second-hand ferries available for purchase, despite that being the Government’s initial preferred option.
While Bluebridge’s place as a competitor within the market is important to ensure capacity and keep prices down, New Zealand cannot end up in a position where we are vulnerable to the withdrawal of private companies from the Cook Strait.
In my view, the Government’s Cook Strait ferries must therefore remain in public ownership as a core strategic asset.
The ferries should be run as efficiently and as effectively as possible, but we should not lose sight that they are something that our country cannot do without.
Putting aside the (shared) frustrations around how we got to this point, the key question now is: how do we ensure we are investing in the future needs of our transport system, our economy and our country?
The first issue is which ferries should we proceed with. The ferries that have been under construction in South Korea at the Hyundai Mipo Dockyard are rail-enabled and would have significantly increased the capacity for both freight and passengers.
They were derided by Finance Minister Nicola Willis as a “Ferrari” option. However, the price of $551 million negotiated in 2021 has not shifted, with the cost increases occurring on the landside infrastructure. As steel prices have increased significantly, this contract is now understood to be excellent value for money.
There are other shipbuilders internationally who can produce smaller ships. New Zealand is potentially facing a situation where we have to take their offers of significantly worse ships at close to or the same cost, all because we were not willing to invest sufficiently in our own ports, which need upgrades regardless.
I can’t help but think that those watching the construction of an inadequate-sized Auckland Harbour Bridge in the 1950s might have had a similar feeling to what many of us are now experiencing.
The Government has scrapped KiwiRail's purchase of new rail-enabled ferries it ordered from Hyundai.
The second issue is who runs the Interislander ferries. There have been reports that the Ministerial Advisory Group wants to take the ferries away from KiwiRail. This would involve setting up either another state-owned enterprise, or a Schedule 4a company (which must be more than 50% Crown-owned).
On the face of it, this would seem like a strange decision. Either of these options would mean its structure was still commercially-focused, as is currently the case with KiwiRail. While ministers may be dissatisfied with KiwiRail, does it make sense to set up a new entity with a similar structure in the hope that this somehow results in better performance?
When I’ve been out talking to maritime and freight experts about this, I haven’t found any sitting around twiddling their thumbs. In all likelihood we would see similar people doing this work to what we have now.
Those critical of KiwiRail have suggested that it is too focused on its rail assets and a stand-alone company solely focused on the Interislander might operate differently.
But the flip side of this consideration is that we might get a rail network and a ferry service that are disconnected from each other and not linked to a broader strategy for our freight networks.
One possibility is that the Government opens the door to some form of mixed-ownership model, or the eventual privatisation of the service. This would be one reason the Government would look at a Schedule 4a company. This is something that the Government must rule out unequivocally.
New Zealand needs a working ferry service. As a strategic asset, that service needs to be publicly owned. And the Government needs to put to one side the details of the project leading up to this point and make the right decision for New Zealand’s long-term interests.
