Why has New Zealand under mixed member proportional representation been governed mainly by minority coalition governments? What are the implications for parliamentary opposition? Based on concepts drawn from comparative politics which enable generalisation from the New Zealand case, this article argues that there are three factors which help explain this puzzle. First, the relationship between types of electoral system and government formats is less systematic than commonly believed. Secondly, a spatial analysis of party competition in New Zealand with regard to socioeconomic and noneconomic issues illustrates that the Labour Party and some of the smaller parties have had good reasons to opt for minority government in recent times. Thirdly, the change from a Westminsterstyle parliamentary opposition to a Scandinavian type issue-by-issue opposition has given small nongovernmental parties exceptional legislative influence, while the large opposition party has had no choice but to wait for the next election.