Wellington  - New Zealand prime minister-elect John Key, the self-confessed centrist leader of a conservative party that won Saturday's general election, chose Monday to keep right-wing allies in his new government at a distance.

Key, whose National Party's 59 seats fell short of an overall majority in the 122-member Parliament, received confirmation of support from the free market ACT party, which holds five seats.

But after post-election talks, Key told reporters that while ACT had pledged it would use its votes to prevent the government falling, its leader Rodney Hide would be appointed a minister outside cabinet.

This gives Key the freedom to make policy around the cabinet table without hassling from the hardline rightist ACT party and allows Hide and his colleagues to criticize the administration publicly on policies it opposed free of collective cabinet responsibility.

Key confirmed that ACT's hardline founder, Sir Roger Douglas, the architect of radical, tough, free market policies that transformed the economy when he was a Labour finance minister in the 1980s, who has returned to parliament at the age of 70, would not be a minister.

Hide, who has said publicly that the new government needs Douglas' advice as it wrestles with a recession and an international financial crisis, told reporters that he was disappointed, but accepted Key's decision.

He said talks with Key and his party would continue during the week before a formal co-operation agreement is signed to try to agree on policy priorities.

A stumbling point is understood to be ACT's insistence that an emissions trading scheme passed by the ousted Labour-led coalition, which committed New Zealand to be a world leader on combatting climate change, be scrapped.

Key said he was committed to retaining a scheme while amending it.

Hide also said ACT wanted the Nationals to sign up to its hard-line policy that would send criminals to jail for a minimum of 25 years after their third violent offence.

Key also had talks with Peter Dunne, the leader and sole parliamentarian of the United Future party, who has defected after being a minister outside cabinet in the defeated Labour government.

Key is trying to fast-track the swearing in of his government so that he can attend an Asia-Pacific summit in Peru next week, where regional leaders including the US, China, Japan and Russia will discuss the international financial crisis. (dpa)