The move comes after a Royal Commission of Inquiry into the Christchurch attack on March 15, 2019 recommended changes to hate speech and hate crime laws, which it said were weak deterrents for people targeting religious and other minority groups with hate.
New Zealand's hate speech laws have resulted in just one prosecution and two civil claims so far, the Royal Commission had noted.
"Protecting our right to freedom of expression while balancing that right with protections against ‘hate speech’ is something that requires careful consideration and a wide range of input,” Justice Minister Kris Faafoi said at a press conference.
The government proposed new criminal offenses for hate speech that it said would be clearer and more effective.
Under the proposal a person who "intentionally stirs up, maintains or normalizes hatred" would break the law if they did so by being threatening, abusive or insulting, including by inciting violence, the government said.
Punishment for such offenses would be increased to a maximum of three years in prison or a fine of up to NZ$50,000. Currently the punishment is up to NZ$7,000 or three months in jail.
It also proposed provisions that would protect trans, gender diverse and intersex people from discrimination. Current laws only target speech that "excite hostility" against a person or group on the grounds of their color, race or ethnicity.
The proposals are now open for public consultation.
Australian Brenton Tarrant killed 51 people and injured dozens when he opened fire on Muslim worshipers in two mosques in Christchurch, shortly after releasing a racist manifesto online, and streamed the shootings live on Facebook.
With support across the political spectrum, New Zealand swiftly banned the sale of the high-capacity semi-automatic weapons Tarrant used. But changes to hate speech laws have been more contentious as some political parties said it would impede free speech."The government’s proposed hate speech laws are a huge win for cancel culture and will create an even more divided society,” New Zealand's smaller ACT Party leader David Seymour said in a statement.