The policy changes would remove gangs' monopoly on drugs, allow better targeting of police resources, and reduce the prison population, Dunne said.
"The old war on drugs approach has failed - we don't use that language anymore," Dunne said.
"This is a health issue far more than it is a legal issue, therefore we need to actually start treating it as such."
Portugal decriminalised all drugs in 2001, and has since seen a fall in overdoses, heroin use and criminal convictions.
The Misuse of Drugs Act in New Zealand is now 42 years old, and a review is on the cards.
But English said he had no interests in Dunne's proposals for reform. The minister was making assumptions about the potential benefits of a licensed trade in Class C drugs, he said.
Speaking to Newshub, English also said he had concerns about the damage cannabis could do, especially when combined with mental illness.
"We don't want to create any more damage than it already does."
English said the Government had approved some changes which made it easier to get access to medicinal cannabis. But it did not plan to ease access to drugs any further.
In February, Dunne removed a barrier to accessing medicinal cannabis by delegating the approval process to the Ministry of Health.
That was welcomed by some drug law reformers, though some wanted the Government to go further by delegating the responsibility to GPs and specialists.
