Prime Minister John Key has accepted that central government will have to pay to upgrade infrastructure on the Chatham Islands, possibly using proceeds from the partial sale of state-owned assets.
Mr Key, who has made his first visit to the islands, says the wharf at Waitangi is in bad need of repair or replacement, and islanders also need a cheaper, more sustainable power supply.
Speaking on Friday, he said the two projects were likely to cost more than $30 million.
Mr Key arrived on the Chathams, 750 kilometres to the east of New Zealand's South Island, on Thursday for a two-day visit with ministers David Carter and Chris Finlayson.
Mr Key says he will go back to Parliament and ask officials to carry out a feasibility study on a hydro station for the island.
He will also investigate options for either repairing or replacing the wharf.
Mr Key also announced the Government would invest a further $400,000 to build up to five new houses on the Chatham Islands.
He says there are a number of low-income families there, but no state housing, and only a limited supply of rentals.
The Prime Minister says living on the Chathams is quite expensive due to high fuel and energy prices, and many people cannot raise the money to build homes.
Mr Key says the Government's earlier investment of $400,000 helped build five homes on the Chathams.
He says the country needs to support those living on the Chatham Islands.
Hand up thanks, residents tell PM
Residents told the Prime Minister they want a hand up, not a handout. They say people are leaving the island due to the high cost of living, lack of jobs and eroding infrastructure.
Local iwi Ngati Mutunga O Wharekauri told Mr Key the local population is shrinking rapidly because there is no future on the island. He says people are not looking for subsidies, but want a solution to help themselves.
Chatham Islands mayor Alfred Preece says infrastructure needs urgent repair.
"There are issues here that have been left for too long and we're just making a real effort now to say catch up with the rest of the country, really. We have an airport out the way there that's not capable of landing a modern aircraft."