Until New Zealand got a Mixed Member Proportional (MMP) system, Labour and National dominated politics.

They still do, but not without the support of smaller parties.

Since the first MMP election in 1996, every Labour or National-led Government has needed support from a smaller party to gain a majority in the House.

That support typically comes in two forms - either through coalitions, or confidence-and-supply agreements.

Broadly speaking, these are two of the options facing Winston Peters and NZ First, as they consider their support of the next Government... whoever that may be.

From afar, the two agreements can seem so similar that many use the word 'coalition' to refer to confidence and supply arrangements.

But the two are very different.

Both allow parties to work together to form a Government, but confidence-and-supply agreements give parties more distance from the Government's core.

When parties agree to form a coalition, they essentially become a Government together, working out a joint policy plan.

That could mean high-ranking ministerial positions, but the cost is high for minor parties.

Auckland University political studies lecturer Victoria Woodman says research shows small parties are not rewarded when they enter coalitions. The risk is high and the smaller party can be harmed by proximity to unpopular policy.

With coalition agreements, "you go where the Government goes, no matter how unpopular that may be with the people that elected you", Ms Woodman told Newshub.

"If you're going to bargain yourself into Cabinet and be forced to support the Government on things your supporters don't like, then it's going to be costly."

Confidence-and-supply agreements, on the other hand, are looser.

Normally confidence and supply sees support parties agree to back the Government on key legislation, like the Budget. In return, the Government will agree to back the support party on specific policies.

Outside the agreement, there's pretty much free reign.

Bear with me, while we take a quick look at what 'confidence and supply' actually means.

The words 'confidence' and 'supply' refer to the two major constitutional requirements of a government.

The first requirement is for the House to have confidence in the Government.

In other words, more than half of Parliament is able to say they have confidence in the Government.

"It comes from these old head-of-state relationships, where you need to make sure there is a majority democratic principle - that the representatives express confidence or faith in the people that are elected to govern," Ms Woodman said.

The word 'supply' refers to "the fact that you need to pass money to run the Government."

That means support for the Government's Budget.

That combination of support on some matters and freedom to vote against other legislation can benefit both parties.

The governing party will have guaranteed support for passing certain laws, but doesn't necessarily have to negotiate all its policy plans with the smaller party.

It can benefit the smaller party too - confidence-and supply-agreements can give parties enough freedom to criticise the Government and to oppose specific policies, while getting ministerial roles and key policies onto the Government's agenda.

But there is, of course, a cost.

The smaller party may be required to back an unpopular Budget and the Government may have difficulty passing legislation it hasn't negotiated with the support party.

The National Party entered Government in 2014, with confidence and supply from United Future, ACT and the Māori Party.

For United Future's Peter Dunne, that agreement saw him become a minister outside cabinet and National agreed to work with United Future in areas like freshwater policy.

That same agreement saw the Māori Party back National on confidence and supply. In return, Māori Party co-leader Te Ururoa Flavell was appointed Māori Development minister, Whānau Ora minister and Economic Development associate minister, and National agreed to work with the party on policy priorities, including Whānau Ora.

Ms Woodman says confidence and supply is less risky than coalition agreements, because smaller parties can vote against legislation that may be unpopular with voters.

But small parties can still be seen as keeping a Government afloat.

"Confidence and supply has a similar risk [to coalitions] insofar as the public has a foggy understanding of the difference between the two. For small parties, proximity to the major governing party is risky."

It was no coalition, but that proximity to National may have helped see the Māori Party out of Government this election.

Newshub.