The government may still need to pay if it wants a resilient ferry connection between both the main islands, says the Maritime Union.
The coalition is to set up an expert advisory group, rather than committing another $1.47 billion for KiwiRail to replace three of its ageing ferries.
Finance Minister Nicola Willis said the panel would ensure that robust plans would support safe, resilient and reliable Cook Strait transport services in the coming years.
KiwiRail said it was open to an independent review looking at the future of its Interislander ferry service.
Chief executive Peter Reidy said he welcomed the appointment of an independent reviewer to look at the best economic options for the service.
Maritime Union chairperson Craig Harrison was glad the Interislander had not been scrapped altogether.
"We know that, for instance, KiwiRail's spent close to $400m on the project so far.
"So there's been quite a bit of money, and we'd say in some respects, well spent, on ferry designs ... so maybe they've reflected on it and realised it's such an important connection."
But he said the government needed to make a choice.
"They have to invest in two new ferries and infrastructure that ... works with the design and efficiencies at either end.
"Or they go for another solution where they don't spend any money at either end for the ferries to dock."
Harrison said cost blowouts have become part and parcel of big infrastructure projects.
Four unions representing maritime and rail workers called for the Finance Minister's resignation last week for halting the funding.
Marlborough mayor Nadine Taylor, who previously said she was "blindsided" by the government announcement that it was pulling funding from the project, supported the establishment of the panel.
"It's a pragmatic way of dealing with the void that we have in front of us ... I'm very, very pleased to see the minister actioning that so quickly," she said.
Environmental watchdog group the Guardians of the Sounds said they were glad mega ferries have been axed in Picton.
But Sounds spokesperson Tim Healey said they wanted to see an indepth risk assessment of the Tory Channel be a part of any future plan.
"Our big concern has always been the Tory Channel entrance, that's probably the most dangerous part of the whole passage.
"It's a very narrow entrance, it's well-documented [there have been] ships grounding, hitting the rocks, being stranded - not one, but multiple times.
"It's got a history."
Tim Healey said the group wanted the Marlborough Sounds to be a safe place for ferries.
Meanwhile, Labour has suggested the government was acting prematurely in halting a planned restoration of the Interislander ferry service.
Its finance spokesperson Grant Robertson said Willis may be regretting pulling the pin on the project with no alternative in place.
RNZ
