Minister for Rail Winston Peters has defended the cost of cancelling the iRex ferry project, saying while he did sign off the original plan, it grew into something much costlier.

The coalition government cancelled the previous contract for two new ferries after the budget blew out to nearly $3 billion. A final $144m payment to previous contractor Hyundai brought the total project costs to $671 million.

Peters said that was "only fair", saying the "decision to cancel Project iReX was never a reflection on Hyundai".

Speaking to Checkpoint on Friday afternoon, Peters said it was a "seriously good deal" compared to "what others said it was going to cost us to get out of the deal".

He said without cutting those "losses", New Zealand would find itself in a similar situation to Tasmania - with new boats, but no suitable infrastructure.

"I went to see Hyundai. I extracted from them that they would deal with us sincerely, that it was nobody's fault in terms of what our problem was. They understood that there's going to be massive infrastructural costs that they weren't aware of, but which was part of the New Zealand deal the taxpayer hadn't been told about."

He said considering the $144 million final payment a loss was "economics 101" that ignored the savings made by not proceeding with iRex, which he claimed would have cost more than $4 billion.

And the $671 million figure he said was "two-thirds" spent by the previous Labour government "with nothing to show for it".

"The previous government spent hundreds of millions on consultants instead of buildings."

Peters was part of the government which initially commissioned the new ferries. He said at the time in May 2020, the cost was just $401 million.

Labour leader Chris Hipkins said Peters was the minister who had signed off on the iReX project in the first place.

"It's somewhat ironic that he's now the one casting around to blame other people for a project he set up."

On Checkpoint, Peters said that was a "lie".

"In 2021 they changed that to massively bigger ferries, and I was not then the minister," nor in Parliament.

Asked if cross-party agreement should be sought before governments undertake such large infrastructure projects, Peters said they did have such agreement on the original $401 million plan.

Hipkins said the decision to cancel the project was a "knee-jerk response by [Finance Minister] Nicola Willis".

"Her recklessness has now cost New Zealanders hundreds of millions of dollars... hundreds of millions of dollars of public investment have been flushed down the drain and New Zealanders have nothing to show for it."

Hipkins added that Willis should have never cancelled the contract without figuring out how much that was going to cost, and without figuring out how much the alternative was going to cost.

"They still haven't told New Zealanders how much their alternative is going to cost," he said.

"We need a reliable inter-island ferry service. One that can take cars and trains and passengers from one island to the other.

"It's a vital connection between the two major islands of our country. It is part of the state highway network. It's part of the rail network.

"We need to do it properly and get it right."

Labour transport spokesperson Tangi Utikere said taxpayers had forked out more than half-a-billion dollars with still no ferries to show for it.

"We need a strong, resilient Cook Strait. What this government has done is they have wasted a whole pile of money on cancelling a botched ferry deal, and at the same time the existing fleet is going to continue to limp along."

Utikere said the original plan was to have ferries delivered by 2026, but New Zealanders now have to wait until 2029.

The Aratere was due to be retired on Monday.

Peters earlier on Friday said talks with shipbuilders for new replacement ferries were progressing well.