THE British system of elections that has served New Zealand for 140 years is dead. And the voters, distrustful of politicians, convinced without evidence that the nation's politics is corrupt, are dancing at the wake. When the 1.92 million who cast their vote on November 6 returned their National Government, they did so with a majority of just one seat, forcing it to compromise and to depend on the vote of the Speaker to pass its legislation. The Government won just 35 per cent of the vote and was abandoned by one in four of those who voted for it in 1990. But more than this, they rejected the first-past-the post electoral system, turning instead to a German-style Mixed Member Proportional (MMP) system which will mean an expanded Parliament combining directly elected members with those nominated by their parties. Voters will opt for party rather than personality for those seats. That system, to be in place for the next election, unless that election comes within the 18-month lead time needed, brings with it the risk of political instability and the inevitability of coalition governments. Choosing it was the action of voters fed up with politicians and their promises, with hard-line economic policies that have brought 9.9 per cent unemployment and poverty up 40 per cent in two years, according to a new study. It found 510,000 of New Zealand's 3.4 million people live below the poverty line. The two major parties, National and Labour, fought the introduction of a system they knew would mean the end of one-party government. Now they have begun the painful and divisive process of adjusting to a system that will give small parties real power, and rely on consensus for smooth government. WHEN the Prime Minister, Jim Bolger, announced his new Cabinet last Saturday, there were dramatic changes - changes some analysts see as an old boys' network (there is only one woman) aimed at giving Mr Bolger what he wants. It was time, he said, ''to recognise the big moves are behind us and a different style of management is called for''. Just how different became obvious when Mr Bolger dumped his hardline Minister of Finance, Ruth Richardson, the first to be dumped in New Zealand for 60 years. Mr Bolger replaced her with his loyal lieutenant and Mr Fixit, Bill Birch, who had been an allyof late Prime Minister Robert Muldoon in the big-spending days - a move seen as flagging a softer line on economic policy in the face of the need for consensus government. Political analyst Colin James says Ms Richardson was made a scapegoat for a process the government now wants to change. She was the radical reformer who ''took things to the wire'', did not consult, and drove through tax policies that embarrassed backbenchers with their constituents. ''Bill Birch will be flexible, responsive to public opinion and backbench opinion,'' Mr James says. Ms Richardson, who turned down other senior Cabinet posts, has vowed to monitor financial policy from the backbench, fighting any attempts to loosen the purse strings. Other dumped ministers, including her key supporters, have also been less than silent over their treatment. Former Transport Minister Rob Storey is so bitter he refused to attend the swearing-in at Government House last week, and the following party caucus. Each of them has the power to cross the floor and bring down Mr Bolger's government. Dissident MPs are also flexing their muscles: Michael Laws says: ''Caucus will now have the power, not a small cabal in the Cabinet.'' Mr Bolger has tried to answer that by increasing the size of his Ministry despite calls to do the opposite, and re-introducing undersecretaries. Now 26 of the 50 National MPs are bound by executive decisions - a means of ensuring that the executive's will dominates caucus, with the taxpayers footing the bill - Opposition parties say. If this sounds like a party bitterly split - and it is - it pales by comparison with the public leadership brawl in the Labour Party this week. When Labour Leader Mike Moore discovered he was to be challenged - an inevitability, given that his party turned a March opinion poll lead of 20 points into defeat - he and his supporters turned their guns on his challenger, Helen Clark, in a way that has both entertained and appalled New Zealanders. Key supporters' homes were picketed, Ms Clark's sexuality was questioned and Mr Moore, denouncing her backers as Chardonnay socialists, appeared unshaven and ranting on national television to denounce the ingrate MPs for whom he had done so much. Former Prime Minister David Lange, who had not helped Labour's election chances by questioning its approach, entered the fray in support of Ms Clark, saying it was a time for calm to work out what must be done, and that she offered ''an almost key objectivity''. When Ms Clark won by 26 votes to 19 Mr Moore refused to pledge loyalty to her. His next move is yet to be revealed, but the prospect of his resignation cannot be ruled out. Nor can his forming his own party. The loyalty of the Maori electorate to Labour is also under threat. A history of support was broken at the election when Labour lost one of the four Maori seats for the first time. The remaining three Labour Maori MPs backed Mr Moore and greeted Ms Clark's election with a threat to resign - a threat suspended but not yet withdrawn after she met them the same afternoon. IRONICALLY, it is the Leader of the Alliance, a grouping of smaller parties which won seats at the election, who best summed up the outcome of the bitter Labour coup. Jim Anderson is himself a disaffected former Labour Party president and, previously at least, an old friend of Helen Clark, who held her wedding reception at his home. ''No-one will win as far as the Labour Party is concerned,'' he said. ''They are in a lose-lose situation. We are seeing the end of the Labour Party as we know it.'' It may sound a sweeping statement, but the reality is even more dramatic: New Zealand is witnessing the end of traditional one-party government and of a political system dominated by two major parties. The 1993 election and referendum ushered in the era of small parties and of what New Zealanders see as the voice of the little man and woman at last being heard. Votes for minor parties and independents at the election totalled more than 30 per cent and, although under MMP only the four parties now represented in Parliament would have won seats, the weighting would have been very different. The Alliance, now withtwo seats, would have won about 22 and New Zealand First, also with two, about 11. Those parties are aware of their rising importance - NZ First Leader Winston Peters is already talking about moving and seconding legislation, and Mr Anderson about the Alliance replacing Labour as the real Opposition. It seems New Zealanders are about to get an early taste of what MMP will hold - instability, stalled legislation, Cabinet reshuffles and early elections included.