Finance Minister Bill English has rejected suggestions of a power struggle between central and local government, insisting they're on the same page.
The Government has been accused of riding roughshod over councils as Parliament urgently debates legislation that would allow it to override the consenting process in certain areas.
Labour voted for the legislation in the first reading, but MP Phil Twyford said the party had reservations about the risk of stripping powers away from local councils.
Following his post-Budget speech this morning, English said there was constructive discussion going on between the Government and councils.
The Housing Accord signed with Auckland City Council recently is seen as a template for greater cooperation between the two levels of bureaucracy.
The Government hopes to reduce the red tape around building to speed up the supply of affordable houses and drive down prices.
"I don't think that they should put the national priorities first, I think that these things can come together. We all know we've got a problem to solve here," English said.
It was about balancing council decision making on their community with understanding the wider economy.
Councils could not do that alone with the current planning process, he said.
"We're in there to work with them, they need the tools that Government can provide.
"We've got common objectives here."
But there was no power struggle, English said.
Housing and child poverty were billed as the two main focuses ahead of the Budget and opponents have criticised the lack of poverty measures, including a food in schools programme.
English said an announcement on that would be made in the next couple of weeks.
"The Prime Minister made it clear he sees there's a problem there."
Labour leader David Shearer said the Government was attempting to bully local councils.
The Government's plan did not go far enough and would not produce affordable homes, he said.
"It's second best and what it's all really doing is bullying councils into making land available when they're already doing their best."
The only way the Government could create affordable homes was to build them and Labour had a plan to do just that, Shearer said.
He said the agreement with Auckland Council was already unravelling.
"They're trying to do the big bully-boy sort of tactics against Auckland Council... the council knows themselves what needs to be done."
Labour did vote for the legislation last night because there was "nothing else".
"Councils need to be concerned because the Government keeps on stepping over top of them and pushing the blame onto them."
- © Fairfax NZ News
Is Shane Jones' departure a crisis for Labour?Related story: Jones job offer 'not shot at Labour' - PM