After the 1996 election National had formed a coalition with the populist New Zealand First party and its controversial leader, Winston Peters.

The coalition was unpopular, as New Zealand First was seen as opposed to the National government, and had made many statements in the 1996 election campaign to that effect, such as saying that only through New Zealand First could National Party be toppled, and Peters said that he would not accept Jim Bolger as prime minister, Bill Birch as Finance Minister or Jenny Shipley in a social welfare portfolio.

National also polled badly, and Jim Bolger was replaced as prime minister with Jenny Shipley.

The polls were still initially close, but without NZ First support, National's chances of forming a government were slim.

The two had not previously enjoyed good relations, primarily due to the presence of the NewLabour Party as one of the Alliance's key members.

The National Party, while not performing exceptionally poorly, failed to gain enough support to keep it in power.

While this was an increase on ACT's previous election results, it was not sufficient to enable the National Party to form a government.

National's former coalition partner, New Zealand First, performed poorly, with voters punishing it for the problems in the last government.

The Mauri Pacific Party, established by a group of defectors from New Zealand First, failed to place even second in the electorates they held.

Included in Labour's total are the Maori seats, which it managed to regain after losing them to New Zealand First in the previous election.

The Greens were not to repeat an electorate win until the 2020 election, with Chloë Swarbrick's plurality in Auckland Central.

New Zealand First leader Winston Peters beat National candidate Katherine O'Regan in a close race with Labour's Margaret Wilson in third.

[11] A by-election to the Wellington City Council was caused after Eastern Ward councillor Sue Kedgley resigned her seat after she was elected a List MP for the Green Party, necessitating a by-election to fill the council vacancy.