The government is proposing law changes it says will allow local councils to share services across regions and provinces, and deliver cost-savings to ratepayers.
The changes will also allow for greater use of Council Controlled Organisations.
Local Government Minister Sam Lotu-Iiga said current laws restricted the ability of New Zealand's 78 councils and 66 water authorities to work together to provide services.
Mr Lotu-Iiga said the changes would lead to greater collaboration.
He said the costs of local services were rising faster than council revenues, so councils needed new ways to manage finances and be more efficient.