Police have been forced to dump their proposal to send mental health workers on crisis callouts after the government reallocated its funding.
The emergency service had lobbied hard for the new approach and the National government last year announced $8 million to trial it.
The scheme was proposed to begin in Auckland, Christchurch and Palmerston North by September.
But police said the new government had "re-allocated" the funding to other health priorities.
"Consequently the three agencies involved [police, ambulance and mental health services] did not receive funding to commence the pilot," a police spokesperson said.
"There are no plans at this stage to re-initiate the pilot."
The police proposal, released under the Official Information Act last year, said police were "increasingly acting as first responders to people who should more appropriately receive a mental health response".
"As a result, mentally impaired people are not always dealt with by police in a manner that is conducive to their mental and physical well-being, increasing their distress and placing them at greater risk of harm while in police custody."
National Party police spokesperson Chris Bishop said the government's move was "nothing short of disgraceful".
"Police spend around 280 hours a day responding to mental health calls. They do a good job, but are not mental health professionals so having a mental health nurse deployed to incidents with police would make a real difference.
The pilot scheme would have eased pressure on police and improved the quality of their response, he said.
"It beggars belief that this government would axe the potentially game-changing pilot which had universal support from those on the front-line".
The National government announced the pilot in August last year as one of 17 initiatives in a $100 million mental health fund.
But Health Minister David Clark said the idea "was never fully developed" and the funding had never been formally signed off by Cabinet.
"It appears the proposal, along with most of the other 16 floated at the time, was hurriedly cobbled together amid growing public concern about the situation in mental health in this country," he said in a statement.
He recognised the need to improve the response to 111 mental health callouts, but believed it was "better for everyone" that people get the help they need before that point, he said.
"We are progressing a wide range of initiatives which will make it easier for people to get that help.
"The increase in funding for mental health services in Budget 18 is significantly greater than anything provided by the previous government."
Mr Clark announced a ministerial inquiry into mental health and addiction in January. A six member panel has been travelling the country to hear people's views and is due to report back in October.
"I expect the review's recommendations will include advice to improve the early response to those in urgent need of assistance."