Prime Minister John Key admits a law change on local body election donations is needed following a scandal involving ACT's John Banks.
Police last week announced they would not charge Mr Banks after an investigation into anonymous donations to his failed campaign for the Auckland mayoralty in 2010, saying there was insufficient evidence.
The six-month period following his donations return, within which any charges would have to be laid, had also expired.
Mr Key backed Mr Banks, who is Minister for Regulatory Reform, throughout the inquiry and says he's confident he complied with the law.
However, he admits the law "may be very loose".
"The law literally is an ass in this particular case," he said.
"[It] may well need reforming and that's something that we'll consider in due course, but I'm comfortable with what he's done."
He says it's possible the Government will change the law, but will need to fit it into its legislative programme.
Labour leader David Shearer agrees a change is needed.
"I would prefer to have a lot of the anonymous donors removed because I actually think we should have a much more open and transparent election system," he said.
"The police have gone as far as they possibly can, but it's quite clear to just about everybody in New Zealand that John Banks knew exactly the donations that he got and who he got them from. He's got off on a technicality."
Mr Shearer says he is happy to work with the government on a solution all parties can agree on.
However, police say they were unable to establish that Mr Banks knew that any of the donations he received were recorded as anonymous in his election return, despite having solicited them.
NZN