The NZ Drug Foundation has commissioned a study into the economic benefits of legalising cannabis, and diverting away from punitive approaches to drugs.

The Government will hold a referendum on personal cannabis use at the 2020 general election - and it will be binding.

Justice Minister Andrew Little announced Cabinet had made the decision on Monday on his way into caucus on Tuesday morning.

"It will be held at the 2020 general election. The agreement is that it will be binding. There is a bit of detail to still to work through," Little said.

123RF The referendum will be binding, Justice Minister Andrew Little says.

National Leader Simon Bridges suggested that the Government was attempting to distract from the general election itself, but said he didn't have a problem with the referendum being binding.

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"I'm pretty cynical that you've got a Government here that wants to distract from the core issues of a general election," Bridges said.

He suspected two other discussed referendums would also be included on euthanasia and electoral reform, although Little has talked down those prospects.

Bridges would be voting against cannabis legalisation and said he hadn't smoked marijuana at any point in his life.

Little said he would not be using a mooted "citizens assembly" for policy development, something the Green Party had pushed for.

The Green Party negotiated the referendum during Confidence and Supply Talks to form the Government.

That agreement stipulated the referendum would have to happen at or before the general election.

It's understood a Cabinet paper has been circulating on the issue for the last few months of 2018, with some issues still to be ironed out.

The Greens favoured passing a law to legalise marijuana prior to the actual vote, that would only be triggered if the referendum suggested that should happen.

That way a future Government - possibly one the Greens are not part of - could not stretch out the timeframe for actually legalising cannabis. It would also mean the public could have a very clear idea of what a "yes" vote would mean in practice - unlike the situation developing after the United Kingdom's 2016 Brexit referendum.

Recent polling on the issue suggest the referendum will see the decriminalisation of marijuana.

An August 2017 Curia poll found 65 per cent of the country supported legalising or decriminalising marijuana for personal possession.

A whopping 81 per cent supported decriminalising it for medicinal use - something the Government have already moved on.

Green Party drug reform spokeswoman Chloe Swarbrick said the party was "stoked" with the news and encouraged Kiwis to vote "three ticks Green" in 2020.

"We've been working with Minister Andrew Little for the last year on the design and process of this referendum," Swarbrick said.

"The fact that it has been announced as binding and at the general election is fantastic news for evidence-based harm reduction policy in Aotearoa New Zealand."

"Illegal substances are exactly the opposite of controlled substances. Cannabis needs to be regulated."

Swarbrick said New Zealand should look at best practice from around the world.

"We don't have the re-invent the wheel here, because we have the opportunity to look at best-practise frameworks around the world that minimise harm," Swarbrick said.

"We want to avoid a scheme that repeats the problems we have with the alcohol industry or with corporate pharmaceuticals. Any model that prioritises profit – whether in the black market or by big business – typically puts people and safety second. We want community control and regulation that reduces harm."

ACT leader David Seymour welcomed the news.

"The overriding aim of our drug policy should be to prevent harm to children. This is not being achieved through the regime we have in place now," Seymour said.

"As we debate the merits of legalising cannabis, we should to look to jurisdictions in Canada, California and Colorado who have put in place more enlightened drug policy.

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