National Party leader John Key says he will sign up to the two-tiered compromise proposal on a transtasman therapeutics agency, a breakthrough that could see legislation taken off ice and passed by Christmas.
The news last night shocked the Government, but it welcomed what it described as "a major change" following its admission of defeat on the legislation just over two weeks ago.
National and Labour have disagreed over whether the proposal was ever properly put to National, but Mr Key is firm on what his response would be today.
"If they came to us now with that proposal, we will sign it," Mr Key said yesterday in an interview with the Herald.
"We sat there waiting for it to turn up. No one has ever seen it."
He said the breakdown in negotiations on the therapeutics agency was Labour's fault, not National's.
Labour had taken the view that it did not need National and therefore did not engage with it.
"And at the last minute they worked [out] that they did," Mr Key said.
"Well, that doesn't make us the bad guy. So bring us the proposal and we'll bring our pen.
While he insists that National's position is the same as it has always been, he has never previously said he would sign up to it.
Annette King, the minister in charge of negotiations on the agency, said last night that she would discuss the development with Prime Minister Helen Clark.
Ms King believed it would be too late for the Australian Parliament to do anything before it rises this month from its final session before the general election in October or November.
But with Mr Key's assurance, she would be able to revive the proposal with the new Australian Government, be it Liberal or Labor led, because they were taking a bipartisan approach.
The legislation is sitting suspended on the New Zealand Parliament's order paper and could be revived at any time.
Ms King said it could be back in the House and passed before Christmas.
"If there is chance to resurrect it I will be in like a shot because I firmly believe it is in the best interests of New Zealand."
She would be happy to pass responsibility to someone else if the relationship between her and National health spokesman Tony Ryall was too poisonous to advance it.
"It may be leader to leader."
She said Mr Key's statement was "definitely new".
"It's a major change."
The proposal was developed by New Zealand First leader and Foreign Minister Winston Peters.
It dilutes the original all-in plan for a two-tiered regime.
The transtasman agency would regulate all goods destined for the Australian market.
Complementary medicines produced only for the New Zealand market could opt to be regulated by the agency or to come under a lighter domestic regime, yet to be established.
Ms King flew to Canberra in June to discuss the compromise proposal with Australian Health Minister Tony Abbott - after it was originally raised by MP Gordon Copeland when he went independent - and he told her he believed he could get it through the Australian Cabinet. Mr Peters developed it further.
Mr Peters is in Manila at the Asean Regional Forum meeting and said through a spokesman that his proposal had been sent to all political parties. National's had been sent to Gerry Brownlee.
He said Mr Key's comments showed "confusion and obfuscation in the National Party, an inability to make a decision and a lack of leadership".
Australian Foreign Minister Alexander Downer will meet Mr Peters in Auckland on Sunday after speaking to the National Party conference.