Australia is facing dual challenges from tobacco companies and tobacco-producing countries after introducing olive-green, standardised packs in December.
Prime Minister John Key said New Zealand's proposal hinged on Australia's success in court.
"Plain packaging is another important step ... if we can take it, we will. But ultimately if we can't, we won't."
Mrs Turia expected separate legal challenges to New Zealand regardless of the outcome in the Australian disputes. But she was highly confident of defeating all comers.
"They won't win," she told the Herald yesterday.
Chapman Tripp trade expert Daniel Kalderimis said a WTO ruling in favour of Australia would give New Zealand confidence that it would survive a similar challenge.
He said the burden of proof was on the tobacco companies and producers: "They have the uphill battle."
The Australian Government was also being sued in its highest court by tobacco giant Philip Morris on the grounds that its plain packaging policy breached a free trade treaty with Hong Kong.
New Zealand also had a trade agreement with Hong Kong, but had greater protections on health grounds. "New Zealand has an arrow in its quiver that Australia doesn't have," Mr Kalderimis said.
British American Tobacco New Zealand said yesterday it could not rule out legal challenges to the government initiative.
A Philip Morris spokesman said there was no evidence plain packaging worked, but there was strong evidence it breached international trade rules.
The Government has not yet put aside money to fund the likely court disputes.
Cabinet documents revealed that a WTO challenge would cost taxpayers up to $2 million and a challenge from a tobacco company up to $6 million, not including compensation if the cases were lost.
The Opposition expressed concern that New Zealand's inclusion in the Trans-Pacific Partnership Agreement would give tobacco companies a direct pathway to sue the Government. However, the plain packaging legislation was likely to be passed before the TPPA was signed.
The Ministry of Health will begin drafting plain packaging policy immediately, and legislation will be introduced this year.
Mrs Turia described the Cabinet's approval as a "great day for New Zealand". The move to plain packaging would make more explicit what tobacco is - a product that kills 5000 New Zealanders a year, Mrs Turia said.
The move was backed by Opposition parties, though the Greens wanted plain packs introduced earlier in order to have an immediate health impact.
Act Party leader John Banks and New Zealand First leader Winston Peters opposed the policy.
Plain packs
*Introduced in Australia in December.
*Expected to be on New Zealand shelves late next year.
*Brand names on cigarette packets will remain but colours, fonts, and print size will be standardised.
*Warning labels are likely to be expanded to three-quarters of the front of the pack.
