Coastguard Tutukākā vice-president Graham Henrick told the Herald the three people were “quite quiet and shocked”.
Henrick said the launch was about 95% underwater when Coastguard arrived, with only part of the cabin and stern still visible.
The skipper of the boat told Coastguard they were motoring along when they heard a loud thump.
“He went forward towards the bow and it quickly became clear the hull was punctured and they were taking on water rapidly,” Henrick said.
As the launch quickly flooded, the three people on board put on lifejackets and called for help.
“The skipper and crew did everything right. They had two means of communication – the skipper still had his mobile phone around his neck in a plastic bag.
“They knew the drill and carried it out.”
A salvage operation will now take place to try to recover the vessel.
An initial assessment by Coastguard showed there was no evidence of any slick.
Coastguard said the incident highlighted the importance of wearing lifejackets, particularly during emergencies.
Henrick also praised the fishing vessel for coming to help.
“It was good to see other parts of the maritime community stepping up,” Henrick said.
“Tutukākā is like any coastal village – the marine community works hand in glove. It’s good to know we’ve got Coastguard support and the backing of locals as well.”