Prime Minister John Key says it is prudent for New Zealand to wait for the outcome of any legal action in Australia before proceeding with plain packaging for tobacco.
The New Zealand Government is to introduce legislation forcing companies to use plain packaging for cigarettes and tobacco products by the end of this year.
In 2012, the Australian High Court upheld the federal government's right to force tobacco companies to use plain packaging. However, Australia still faces possible action under World Trade Organisation rules.
The New Zealand Government will start the legislative process, but won't make a final law change until any action in Australia has run its course.
Mr Key says New Zealand will abide by any ruling from the WTO and that waiting for Australia is a sensible move.
Tobacco giants Phillip Morris and British American have vowed to fight court action in New Zealand.
Associate Health Minister Tariana Turia said legal challenges are still possible under WTO rules and the Government estimates it would cost between $3 million to $6 million to defend any challenge.
However, she believes the new law will help to improve the health of New Zealanders.
"This move to plain packaging will remove the last remaining vestige of glamour from these deadly products and I'm really delighted that New Zealand is on track to be the second country in the world to legislate for plain packaging."
The Government has already moved to increase the price of tobacco each year and to ban the display of tobacco products for sale in public view. It would introduce plain packaging, subject to public consultation.
The Labour Party says the legislation delay comes as a surprise, but supports the policy. However, the Greens and New Zealand First question why New Zealand isn't acting independently of Australia.
New Zealand First leader Winston Peters says events in Australia shouldn't dictate domestic policy on tobacco.
"Well, I don't get the significance of waiting for Australia. I mean, I know that they're running now our refugee policy; now they're running our social welfare policy in terms of what's good for New Zealanders or not."