New Interislander ferries: From mega blowout to managed pain
Thursday, 20 November 2025
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ANALYSIS: The updated costings for New Zealand’s new Interislander ferries don’t make the decision to cancel the original iRex project look any more or less compelling.
New Zealand will now get smaller ships and less extensive portside redevelopment — and yet will still spend close to what the original project might have cost, once the sunk iRex spending is counted. And the country will get it all years later.
It is all a question of how badly the old project would have really blown out.
Regardless of whether the original decision to cancel was right, Finance Minister Nicola Willis will likely wear the political consequences of the cancellation for the rest of her time in Government. Winston Peters, meanwhile, will happily take the credit for appearing to have sorted the mess out.
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The challenge is the sunk $671 million poured into iRex. Convincing the public that this was necessary pain — in order to pivot to a smaller, more modest, but still nearly $2 billion project — is a hard sell.
It is from mega blowout to managed pain.
Willis’ call was influenced by Treasury’s severe warnings and the track record of cost overruns. What began as a sub-$1b project (including ships) had blown out to $2.6b. Treasury advice suggested the total could have reached $3.2b and potentially slid toward $4b if costs continued increasing at the previous rate. The paper trail of overruns was extraordinary.
The new project announced by Peters carries a headline cost of $1.86b, most of which comes from taxpayers — meaning over $1b of that is still tied up in portside works.
When Willis axed funding for the original project, she said she no longer had confidence that the cost escalation could be contained. The iRex plan had shifted from a ferry procurement into a major port redevelopment. By December 2023, only 20% of projected spend was for vessels.
Labour has zeroed in on the cost of the ships for political effect — but the vessels were the easy part: they could be bought at a fixed price. The ports were always the volatile, expensive variable.
So yes — the new plan is cheaper. But the Government is also getting less. Cheaper isn’t automatically better value; sometimes it simply means paying for and getting less.
On the ships themselves, Peters appears to have secured a reasonable deal. The new Chinese-built ferries will cost $595m — less than 10% more than the cancelled Hyundai Mipo vessels at $551m — despite inflation and global shipbuilding cost increases. And the new vessels will still be larger than the current ageing fleet.
Critically, their smaller size compared to the original iRex ships reduces the infrastructure required to operate them — one of the biggest drivers of cost in the old plan. And Peters ensured the new ferries remain rail-enabled. Purchasing non-roll-on/roll-off vessels while ownership remained with KiwiRail would have been strategically absurd.
But caution is warranted. The forces that blew out iRex — supply chain disruption, inflation, project creep and questionable oversight — have not necessarily evaporated. If the coalition wins a second term, it will own the delivery risk, and voters will judge it in 2029 on whether ferries arrive on time and within budget.
So is this better value? That depends on whether you believe the original iRex project was beyond rescue — or whether tighter control, rescoping or governance might have delivered something similar without the sunk $671m loss.
Measured against the worst-case projections for iRex, the new plan clearly looks better.
Measured against the theoretical best-case scenario? The answer is less clear.
As with most infrastructure debates in New Zealand, time — and likely the next election — will tell.
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