After 15 years of neo-liberal governments, New Zealanders elected a Labour-dominated coalition government in November 1999. So far its policies appear less managerial and market-oriented than New Labour in the UK, perhaps because New Zealand Labour needed to repudiate and disengage from the neo- liberal reforms which it initiated itself in the early 1980s. Privatisation now seems firmly off the agenda and there is a new willingness to address managerial excesses within the public sector. In education the bulk funding of teacher's salaries, a national testing pilot and the charging of interest on government loans to tertiary students are all being discontinued. At the same time, although the new government has signalled its belief that market concepts are not appropriate for a public education system, changes to school enrolment regulations to reduce competition do not appear likely. Moreover speculative forces over the last 15 years have gutted the productive sector of the economy and there will also be resistance to change within New Zealand's bureaucratic/business milieu. This paper will consider whether the new coalition is likely to be able to overcome these problems, and just what kind of "Third Way" might eventuate in New Zealand.