Political parties could get into Parliament with just 3-4 per cent of the party vote under proposed changes.
The Electoral Commission is conducting a review of the MMP electoral system following the referendum last year.
Chief Electoral Officer Robert Peden today announced the proposals for change.
They include lowering the threshold from 5 to 3-4 percent of the party vote, with 4 per cent being preferable.
The commission also "strongly recommended" the one seat threshold, which allows parties that win one electorate seat to bring other MPs into Parliament, be abolished.
That would mean parties would have to get above the 4 per cent threshold to get more MPs into Parliament.
The ACT Party had five MPs following the 2008 election on the back of then leader Rodney Hide's Epsom seat.
That was the "single biggest concern" people had about the MMP system, Peden said.
The 4 per cent threshold was an area "in which we can afford to move cautiously".
"Going to 3 per cent would be a really significant change."
Below 3 per cent would allow a proliferation of small parties and could reduce the stability of Parliament, he said.
The commission also found that the organisation of party lists should remain with political parties and that dual candidacy and the ability for list MPs to stand in by-elections should remain.
However, it recommended the overhang be abolished, meaning there could not be more than 120 MPs.
There are currently 121 MPs because the Maori Party has more electorate seats that its share of the party vote.
That change would reduce the number of list seats available for allocation.
"The concern about removing the one seat threshold...one of the consequences of that is that the chance of an overhang would increase," Peden said.
He said there were few changes proposed but they were important.
However, they would not significantly alter the system and therefore a referendum on them was not needed.
That would mean the changes could be adopted for the 2014 election.
Labour is backing the proposed changes but National says it is still considering its position.
Labour MP Lianne Dalziel said the public had spoken "loudly and clearly" about the coat tails clause, which had allowed parties to win seats even though the party did not have sufficient support to get over the five per cent threshold.
A spokesman for acting Prime Minister Bill English said today the paper had been received and would be "carefully considered by National over coming weeks".
But National opposed lowering the 5 per cent threshold during the submission period.
NZ First Leader Winston Peters said he did not support reducing party vote threshold and said the proposed changes went against public opinion.
He also opposed the removal of the overhang rule which he said was anti-democratic.
"If there were concerns about this then why didn't they consider reducing Parliament to 100 MPs, theoretically leaving a number of seats available for the overhang."
Peters did support the one per cent threshold being abolished.
"There have been numerous attempts to corrupt the integrity of MMP by the National, ACT and United Future parties by misusing the intent of the one electorate seat threshold for the allocation of list seats."
Anti-MMP campaigner Jordan Williams said reducing the party vote threshold was dangerous and the review was a missed opportunity.
However, he supported other proposed changes.
"It is a relief that the Commission has listened to the overwhelming calls for the one-seat threshold and overhang provisions to be removed but the 5% threshold must stay if we are to avoid more Winston Peters-type politicians deciding who wins elections."
ACT Party leader John Banks said he did not support the changes, particularly the one seat threshold which has been a lifelife for his party.
"The purpose of the one seat threshold was to ensure that political parties with concentrated support got representation in Parliament," he said.
"The proposed reduction to a four per cent threshold is arbitrary and the Commission's own proposal paper says there is no consensus, which is all the more reason to maintain the status quo."
Banks also said the 5 per cent threshold should remain.
"Those who want to gerrymander with the electoral system, do so because they lost the last election."
No electoral system was perfect but the proposed changes did not benefit New Zealand, he said.
Green Party MP Holly Walker welcomed the Electoral Commission's recommendations.
Abolishing the one seat threshold and lowering the party vote threshold would reduce the number of wasted votes, she said.
"Removing the one electorate seat threshold will make a big difference for fairness by making sure that the votes of people in some electorates are not given more weight than others," she said.
The review began in February with a consultation paper.
By the end of May 4700 submissions and 116 oral presentations had been made.
Submissions on the proposals paper released today are open until September 7.
The commission will then make a final report to Justice Minister Judith Collins by October 31.
The review did not consider the Maori seats nor the number of MPs.
In their submissions, political parties leant towards the status quo in all areas except for the 5 per cent threshold and the coat-tailing rule. Most put forward suggestions that would benefit their party, although NZ First argued to retain the 5 per cent threshold.
Leader Winston Peters said yesterday that cutting the threshold would create instability. "If you're good enough, you should make 5 per cent.” He would allow "coat-tailing" but only if a party won 4 per cent of the party vote.
National argued to retain most of the existing rules, but called for an increase in the population tolerance for seats from 5 per cent to 10 per cent.
Labour, the Greens, the Maori Party and UnitedFuture wanted a lower threshold. Labour and the Greens pushed for an end to the "coat-tailing" rule as did Mana leader Hone Harawira. But yesterday he called for a much lower threshold than 4 per cent.
- The one electorate seat threshold for the allocation of list seats should be abolished.
- The party vote threshold for the allocation of list seats should be lowered to 4 per cent.
- Candidates should continue to be able to sand both in an electorate and on a party list at general elections.
- List MPs should continue to be able to contest by-elections.
- Political parties should continue to have responsibility for the composition and ranking of candidates on their party lists.
- The provision for overhang seats should be abolished for parties that do not cross the party vote threshold.
- That 76 electorate seats be identified as the point at which the risk of proportionality from insufficient list seats becomes unacceptable. New Zealand is unlikely to reach that point before 2026. Parliament should review this matter as the gradual erosion of list seats relative to electorate seats risks undermining the diversity and representation of Parliament.
- © Fairfax NZ News
Is John Banks' upcoming trial the end for the ACT party?Related story: Banks takes only viable option