UPDATED 8.30pm The Labour Party and the Green Party have confirmed that they will work together at next year's election in a bid to change the Government.

LISTEN ABOVE: Andrew Little talks to Larry Williams

Labour leader Andrew Little and Green co-leaders James Shaw and Metiria Turei announced this afternoon that they had signed a Memorandum of Understanding.

Mr Little said that means great coordination, but not merging into one.

"We can agree to disagree and we will. We're still parties with our own policies, our own platforms, our own heritages, our own cultures and that will continue.

"It is time for a change," Mr Little said.

"Labour and the Greens have reached an agreement, common ground, that now is the time to start the work to change the Government in 2017."

MoU sends a clear signal to NZers who want a better govt - we'll work together to deliver that. #ChangeTheGovt pic.twitter.com/6CHPGw916e

— New Zealand Labour (@nzlabour) May 31, 2016

Ms Turei said the partnership would mean it was "crystal clear" what a new Government could look like. The two parties had distinct qualities, she said, but shared a vision to bring about "inspiring change" in New Zealand.

"We are a great match for creating a better future for Aotearoa New Zealand," she said.

Political commentator Richard Harman said Labour and the Greens will both better off together than they were apart.

Mr Harman, editor of Politik.co.nz, told Larry Williams the deal could swing decisive seats in their favour.

"If they were to agree on a single candidate and say Auckland Central and Maungakiekie both of those seats would fall, and the big one that they would try and get is Ohariu."

He said the Greens could help Labour reach affluent central city residents who might otherwise vote for National.

Labour rejected an approach by the Greens to work together in 2014 - a decision which former Labour leader David Cunliffe later said was a mistake.

But Labour leader Andrew Little is making sure there's no repeat of the 2012 mayhem, when then-Green co-leader Russel Norman announced he wanted the finance portfolio.

"Grant Robertson will be the Finance Minister. We've had no other discussions about any other position or any other role. This is about getting ourselves ready to beat the present government in 2017."

The partnership would have implications for any potential coalition deal with New Zealand First, who have previously ruled out working with the Greens.

Ms Turei said the Memorandum of Understanding did not eliminate potential coalitions with other parties, including New Zealand First.

Newstalk ZB Political Editor Barry Soper said semi-formal coalition between the two parties has been announced before but unfortunately it's never paid dividends for the Greens who've yet to be part of a Government.

Barry Soper said Labour's hardly been a stellar performer in the opinion polls but a joint formal party deal could at least show there's a concerted effort, although without New Zealand First they'd struggle.

Mr Peters refused to say this afternoon whether the Labour-Greens MoU would mean New Zealand First could not go into Government with the two parties.

He would not directly answer questions about whether he could work with the Greens.

Mr Peters said that MoUs “had never been the mantra of New Zealand First”.

“We do not like jack-ups or rigged arrangements behind the peoples’ back. We’ll go into the election just ourselves and our policies seeking to change how this country is governed.”

Mr Harman said Mr Peters will need to be persuaded to work with a Labour-Greens alliance if he holds the balance of power.

"He plays his cards very close to his chest, and he's a very good negotiator, and I think it will depend on the deal on the day. I think one thing we can say is that he will negotiate with National first."

Mr Harman said Winston Peters equally may not want to be part of a National Government if it is led by John Key.

National Party campaign manager Steven Joyce said the two parties’ MoU appeared to have a number of “weasel words” and out-clauses.

“Labour couldn’t quite say whether they’d prefer the Greens over Winston Peters or Winston Peters over the Greens,” he said.

“So that’s where is started to sound like an episode of the Bachelor to me – they couldn’t quite make up their mind.”

Mr Joyce said the joint partnership was unlikely to affect National’s campaign strategy.

It would allow National to re-use last election’s TV advertisement, he said, which showed Labour and Greens in a boat going nowhere.

The Labour Party’s largest union affiliate, E tū has endorsed the commitment of Labour and the Green Party to work together.

E tū Assistant National Secretary, John Ryall said working families were suffering under current government policies, and it was time for a change of direction to address unliveable wage rates, unaffordable housing and increasing barriers to health care.

“Political parties on the centre-left need to focus on a positive message of what they will do in government to change the current situation.

“It is simply a waste of time for these parties to be scoring points off each other, rather than working to develop a progressive platform that can win support from the majority of New Zealanders.”

He said E tū believes that the move by Labour and the Greens to work together is a “game-changer” and it hopes that it will be accompanied by other parliamentary parties developing their own co-operation arrangements with this group.