Finance Minister Grant Robertson said he was surprised that the capital gains tax decision was getting such a strong reaction and he said claims that Prime Minister Jacinda Ardern had shown a lack of leadership over it was "ridiculous."
"I'm not surprised that there are people who feel strongly about the importance of getting better balance back into the tax system."
He understood they were disappointed, as he was.
"What I am a bit surprised about the extent to which people are defining the Government by this decision when I believe we have done a lot to be proud of in terms of making New Zealand a fairer and better place, including within the tax system by closing GST loopholes, extending the brightline test and ring-fencing of rental income losses.
"I feel that we have done a lot that is progressive and important, so I am a little bit surprised by that reaction," Robertson told the Herald.
Ardern announced last week that the Coalition Government, Labour and New Zealand First, had been unable to reach agreement over the proposed capital gains tax and that Labour would not campaign on it any longer under her leadership.
He believed it had been elevated because of the attention it had received from the media.
"It would have represented a shift at the core of our tax system so I understand why people see it as significant but there are other ways of achieving fairness and that is what we are focused on."
Asked about widespread claims that Ardern had shown a lack of leadership on a capital gains tax, he said: "I just think that's ridiculous."
"I think people need to take a step back and realise this is an MMP Government. We formed this Government with Labour on 37 per cent. "
The Government reached consensus on many things every week that had not been spelt out in agreements or the Speech from the Throne.
"In the end, we cannot beat the maths of the Government and that's the reality of where we are.
"The Prime Minister has shown immense leadership over recent months on a number of topics. It's just on this particular issue, the Coalition couldn't find consensus."
Labour campaigned on a capital gains tax in 2011 and 2014, then in 2017 campaigned on setting up a tax working group. The group chaired by Sir Michael Cullen came up a comprehensive capital gains tax with a minority of the group preferring to limit it to rental properties.
In the end, New Zealand First supported neither.
Robertson said the decision had not put any strain on the Coalition relationship with New Zealand First.
"It is important actually that when you are in a relationship like this, you don't let any one negotiation dominate the things we are doing together and the agreements we've got.
"It's one that didn't come off but there are plenty of others than have."
Robertson said the Labour Party's New Zealand Council were consulted about taking the policy off the table.
"I'm sure many of the New Zealand Council were disappointed in the same way I was that we couldn't get it over the line this time," said Robertson. "But they were certainly consulted and were part of this decision."
The party's new tax policy had not yet been written but over the coming months there would be discussions to put that together.
"There will be plenty of ideas inside the party around how we can create the fairest possible tax system. It's just it won't include a capital gains tax."
He said the Government was doing a lot to be proud of in terms of reducing inequality, addressing child well-being and mental health issues, lifting wages and implementing the families package.
"I know most members of the Labour Party understand the importance of being able to be in Government and make change and every now and then there will be something we don't do that we would like to do but we are achieving a lot alongside that."
Meanwhile, National Party leader Simon Bridges says his party's policy of indexing tax thresholds to the cost of living will become a private member's bill to be put in the occasional private members' bills ballot.
It would need the support of Labour, the Greens or New Zealand First to be passed if it were one of 71 bills to be drawn.