An overhaul of the border regime will see Kiwis held for up to 28 days if they refuse a test and punished with a $4000 fine or jail if they break isolation rules.
And the Government is looking into options for how to fund the system long-term, including potentially a co-payment, with it costing $81 million so far at an average of $3,295 per person.
The crackdown comes as the Defence Force has taken charge of an urgent end-to-end review of the system to get the bottom of recent blunders and doubled its on-the-ground presence from 32 to 72 personnel.
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Air Commodore Digby Webb said following a site visit in Auckland on Thursday, he'd already identified some issues relating to staffing and resources and had taken action.
The example of the two Covid-19 positive sisters being able to leave without a test showed the system had not been 100 per cent successful, Webb said.
"I understand that every New Zealander will be concerned by what has eventuated this week, and will want to know as soon as possible that our processes and procedures are adequate.
"I am committed to ensuring we understand what has happened and fix any shortcomings."
The Defence Force review would look at the moment a person is granted entry into New Zealand, to their departure after 14 day and a final report would be delivered next week.
But Webb made it clear returnees would be responsible for their own actions.
If they were found to be breaching the rules, could be fined up to $4000 or jailed for six months under the Covid-19 Response Act.
"We did not require a police officer on every street corner during the lockdown here in New Zealand, and each New Zealand played their part. We are asking the same of returnees," Webb said.
In his role of Head of Managed Isolation and Quarantine, Webb will oversee all processes within the facilities including testing, enforcement of rules, logistical supply chains such as PPE, coordination of relevant agencies, standing up of new facilities and continued oversight of repatriation flights.
He also has accountability for those people who are in charge of each facility.
And as part of the new leadership of New Zealand's first line of defense against Covid-19, Housing Minister Megan Woods was given responsibility for the ongoing management of the operations.
She said the problems implementing the testing regime at the border did not meet the expectations of the Government or of New Zealanders.
"We fully accept that the expectations we all had about how the managed isolation process works, have not been working, and we are taking action."
Woods also had a strong message for would-be rule breakers: "Every single person who wants to join the team of five million must earn it, just as we earned the right to shift to Level 1".
From October 1, the overarching lead and coordination of the facilities will shift to the Ministry of Business, Innovation and Employment which Woods said had the "scale and scope" to deal with complex issues.
The Ministry of Health had been the right agency to deal with the immediate health threat.
But given Covid-19 could be a threat for years MBIE was better placed to take responsibility of the significant logistical operation juggling facility capacities with incoming flights in the long-term, she said.
About $81 million had been spent to date on quarantining and isolating more than 21,000 Kiwis with another 3200 more expected by the end of the month.
With an average cost of more than $3,200 per person, the Government is also looking at options for how to fund the facilities long term which could include co-payment.
Director general of health Ashley Bloomfield said his ministry now also had the power to hold someone for up to 28 days - or two incubation cycles of Covid-19 - if they refused a test.
He made it clear that from now on, no one would leave managed isolation or quarantine early without returning a negative Covid-19 test result.
Yesterday 6273 tests were completed on people in managed isolation and the community but there were no new cases identified which Bloomfield said was "very reassuring".
And 401 people were considered potential contacts of the two UK sisters and were now being tested and everyone who had been given passes out of managed isolation on compassionate grounds was being called back for testing.
The current return of negative results gave authorities growing confidence the women had not caused widespread community infection.