Category: transport policy

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Finance Minister needs to explain ferry decision cost to taxpayer

Source: Maritime Union of New Zealand

The Maritime Union of New Zealand says the cancellation cost for the iRex ship build is likely to come in at more than NZ $300 million, and could run up to a maximum cost approaching a half a billion dollars (NZD) at current rates. 

This would be on top of around a half a billion NZD in sunk cost on the cancelled iRex project – figures the Maritime Union has been advised on after consulting with the maritime industry here and offshore.

Maritime Union of New Zealand National Secretary Carl Findlay says the Finance Minister needs to explain how this happened and why she should keep her job. 

“This single decision is likely to have torched a billion dollars of taxpayer’s money with nothing to show for it. It’s fiscal arson.”

Mr Findlay says on top of this cost, New Zealand still needs to buy new ferries. 

He says unlike the iRex ferries cancelled by the Minister, which were purchased at a fixed price in 2021, their replacement will have to be bought at 2024 shipbuilding prices, which are currently at their highest since before the global financial crisis of 2008.

“Between that and our dollar being much weaker than it was when we struck the 2021 deal, the Government’s replacement ships could cost twice as much to build as the cancelled ones.”

Mr Findlay says industry players believe the Government is looking to hide some of this cost through a Private Public Partnership. 

He says we’ve seen time and time again all this would do is increase the expense, and shift it onto users and future taxpayers.

“Putting a private for-profit gatekeeper on the key freight route between our main islands is a recipe for economic disaster.

“Prime Minister Luxon needs to bite the bullet, try to salvage the iRex deal in whatever way he can, and admit the cost his Finance Minister’s commercial blunder has put on the taxpayer.

“He should also ask himself whether his Finance Minister should be left in charge of running our economy after making this colossal economic and commercial mistake.”

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Ferry debacle means New Zealand is ‘steering blind’

Source: Maritime Union of New Zealand

Confusion around the future of KiwiRail’s Cook Strait ferries has left New Zealand ‘steering blind’ with its main inter island transport link, says the Maritime Union.

The latest development in the ferry saga is a suggestion in ministerial documents that KiwiRail might exit the Cook Strait ferries altogether if it is commercially unviable without subsidy.

Briefing documents from the Ministerial Advisory Group and Ministry of Transport have been released to the media under the Official Information Act.

Maritime Union of New Zealand National Secretary Craig Harrison says this scenario is deeply concerning and shows the Government has dropped the ball on transport.

Mr Harrison says he is surprised no one in the Government could foresee the consequences of cancelling iRex project funding last year.

“Within a few months we have gone from looking forward to modern ferries and fit for purpose terminals that would support our economy and producers for decades, to the future of interisland transport and everyone who relies on it being in free fall.”

He says while Strait Shipping currently offer ferry services that complement KiwiRail ferries, the scenario of putting the entire connection in the hands of a single overseas-owned monopoly would be a grave error, and would probably not be viable.

“The idea there is some magic market solution is not credible, because any operator will still have to source and pay for suitable vessels.”

He says the primary focus of interisland ferries should be their importance in the supply chain and the national economy, which included rail capability.

“The Cook Strait is part of the ‘blue highway’ – an extension of our national road and rail links.”

Mr Harrison says the current ferries are nearing end of life and are experiencing ongoing maintenance issues, with potentially catastrophic outcomes.

Interisland ferry Kaitaki lost power on its approach into Wellington Harbour on 28 January 2023, and was left drifting towards the coast in heavy weather with more than 800 passengers and 80 crew on-board. It issued a mayday before managing to restart engines and returning to port.

KiwiRail is now facing a health and safety charge relating to this incident brought by regulator Maritime New Zealand.

“Continuing to lease second hand vessels would still be costly, and mean there will still be ageing ferries on Cook Strait, increasing the risk of mechanical failure, delays, maintenance costs, and safety risks.”

Mr Harrison says the costs of cancelling the project at Korean shipbuilders Hyundai has not yet been confirmed but could run into hundreds of millions of dollars.

A suggestion by KiwiRail that the ferries be built, then on sold in order to try and recoup some of the cost of the cancelled project, was quashed by the Minister of Finance.

However, it has been reported the new Ministerial Advisory Group on the ferries has suggested this could be a potential option to avoid a massive financial loss.

Mr Harrison says further drawbacks include the failure to move to new low-emission technology and the implications for our climate change response.

Globally-recognised Climate Bonds Initiative certification issued to KiwiRail for a $350 million green loan has been revoked due to the cancellation of the ferry purchase.

The Maritime Union view is the Government should review the entire decision to cancel the new ferries and new terminals, says Mr Harrison.

“There is an opportunity to revisit the project, seek cost savings if required, then get on with the only responsible course of action which is a fit for purpose Cook Strait ferry link with modern vessels and terminals.”

He says it is now clear that planned tax cuts are not feasible as essential infrastructure investment has to take priority.

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Government transport plan fails to provide economic security

Source: Maritime Union of New Zealand

The Maritime Union says the new Draft Government Policy Statement (GPS) on Land Transport 2024–2034 fails to plan for a resilient and secure transport system, putting the New Zealand economy at risk.

The previous Government introduced coastal shipping as a new activity class in its GPS on land transport in 2021.

It invested $30 million in the coastal shipping sector which resulted in new vessels coming onto the New Zealand coast, reducing road congestion, improving resilience, and reducing carbon emissions.

This progress has now ground to a halt, with coastal shipping ignored in the new Draft GPS on Land Transport 2024.

Maritime Union of New Zealand National Secretary Craig Harrison says for the Government to simply leave out coastal shipping is a failure of insight into the long term needs of the transport sector.

Mr Harrison says the lessons of the last few years are obvious.

“We have seen major disruption to New Zealand transport links through the pandemic and natural disasters including cyclones and earthquakes, with regions left isolated and at risk.”

Mr Harrison says New Zealand needs a balanced, multi-modal system that prioritises redundancy and resilience in transport.

“This new draft document notes New Zealand has faced significant challenges from these events, but then ignores the important role of domestic coastal shipping that is now recognised in the industry.”

Mr Harrison says the Government seems to be basing its transport strategy on delivering for its donors, rather than any rational and balanced approach.

“As the rest of the world moves towards low emission, resilient transport modes, and prepares for climate change driven extreme weather events, New Zealand is left exposed and vulnerable.”

He says with the Cook Strait ferry connection in limbo, coastal shipping ignored, and a crisis in seafarer training, New Zealand is moving towards developing world status.

“The Government now has an opportunity to correct course and focus on the future resilience of New Zealand’s economy – or go in reverse gear by promoting a congested, polluted and vulnerable transport system.”

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Cook Strait connection in limbo

Source: Maritime Union of New Zealand

The Maritime Union of New Zealand says pressure is mounting on the Government to provide leadership on the Cook Strait ferries.

One year ago, then National Party opposition Transport Spokesperson Simeon Brown described the Cook Strait ferries as the “the biggest pothole on State Highway 1” after multiple technical problems with ageing ships.

In August 2023, he then described the current ferries as causing “significant safety concerns.”

Maritime Union of New Zealand National Secretary Craig Harrison says the future of Cook Strait has now become a “black hole not a pot hole” in our transport network, due to the Government’s demolition of the iRex project.

“Despite his strong criticisms prior to being elected, we have not heard a peep out of Transport Minister Simeon Brown recently about the future of the Cook Strait as a key transport link.”

He says the new Government’s iRex decision in late 2023 has left the future of the interisland ferries in limbo.

Mr Harrison says many industry figures and commentators from across the political spectrum have expressed concerns about the future of the Cook Strait connection and the logic of the Government decision.

He says there is a danger that New Zealand will end up with a cheap, sub-optimal ferry option that will see ongoing disruption and safety issues.

“The long term cost may end up a lot higher.”

Mr Harrison says the Government may still have to walk back its hasty call to can the new ferries and terminals.

KiwiRail will appear before the Transport and Infrastructure Select Committee at Parliament on Thursday 15 February.

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Substantial progress for transport under the Labour-led Government

Source: Maritime Union of New Zealand

The Maritime Union says substantial progress in the ports and shipping sector in the last term needs to be continued under a Labour-led Government.

Maritime Union of New Zealand National Secretary Craig Harrison says three key successes of the current Government have been in building coastal shipping capability, improving health and safety through the Ports Health and Safety Leadership Group, and laying the foundations for improved conditions in the industry through Fair Pay Agreements.

He says the interests of the transport industry are wider than shareholder profit, and the needs of workers and the environment need to be prioritized.

Mr Harrison says the $30 million coastal shipping fund has seen new New Zealand flagged vessels come onto the coast after years of decline.

He says following the pandemic disruption, the transport industry now acknowledges the need for a vibrant coastal shipping sector.

“Coastal shipping is a low emission mode and provides resilience in the face of the extreme weather events that are already disrupting land transport links.”

He says the development of the Port Health and Safety Leadership Group led by Maritime New Zealand and implemented by the Government has been a game changer.

“The maritime industry has had a terrible rate of deaths and injuries in recent years, and this is now changing as the industry works together under the new system.”

Mr Harrison says Fair Pay Agreements (FPAs) are a great step forward for undervalued workers.

“Even employers now acknowledge the low wage casualization model has been a failure and we have to provide decent wages and conditions for all workers.”

He says workers make up the majority of voters and need to focus on real issues and the facts of what was in the interests of working-class people.

“Past promises of tax cuts have always benefited the wealthy section of the population – they do not benefit the majority of workers who need better wages and conditions and public services.”

Mr Harrison says Labour and the Greens have demonstrated a clear commitment in Government to the interests of workers and a sustainable and resilient transport industry.

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National strategy required for future of New Zealand ports and shipping

Source: Maritime Union of New Zealand

The Maritime Union says there needs to be national level planning around ports and coastal shipping, otherwise New Zealand is going to find itself in a bad position.

Maritime Union of New Zealand National Secretary Craig Harrison says there needs to be a stronger response to building resilience into the supply chain.

The Productivity Commission has noted disruptions to global supply chain trends are likely to become more frequent with causes including pandemics, war and climate change.

Mr Harrison says the Union is calling for political solutions including a port strategy and investment in coastal shipping.

He says one problem is how New Zealand ports are primarily seen as income streams for owners, as opposed to national infrastructure that underpins the successful functioning of the economy.

An example of lack of co-ordination is the multiple conflicts around the future of the Port of Auckland, he says.

“In the case of Port of Auckland, we have major roading and rail projects being proposed at the same time as a privatization agenda and plans to shrink the port despite no clear alternative capacity – in other words, total confusion.”

He says claims there can be a straightforward relocation of port activities to Northport (Whangarei) or Tauranga are unrealistic.

“Northport does not even have a rail link at this stage, and Tauranga is operating close to capacity. This situation is not going to be resolved by highway mega-projects that simply move congestion around.”

He says with ongoing climate-driven weather events becoming more severe, proposals to sink more and more resources into roading projects shows a refusal to face facts. 

Mr Harrison says there needs to be a strategic shift to build the role of coastal shipping.

He says New Zealand coastal shipping provided resilience that was demonstrated during COVID and during natural disasters such as earthquakes or flooding, when regional land links were out of action.

“For a fraction of the enormous price tag of monster motorways, New Zealand could become a leader with investment into low emission coastal shipping, and create safer, less congested roads.”

“The recent Government investment and resulting growth in coastal shipping shows the potential but there needs to be an integrated shipping and ports policy to build on this.”

He says that the Maritime Union is campaigning for changes to the Maritime Transport Act to promote New Zealand shipping and maritime jobs.