The Prime Minister John Key says New Zealand will not release a fund for tourism development in Niue, until it's satisfied the money will be spent as intended.
Mr Key is on the last leg of a tour of four Pacific countries, and there was visible tension between the two leaders during the visit to Niue.
The Niuean Premier, Toke Talagi, made no effort to hide his displeasure at what he sees as New Zealand's failure to make the two-million dollars available for tourism and economic development.
He says if New Zealand doesn't trust Niue, then this country should come and build the infrastructure.
John Key says the New Zealand government has to justify the funding to its taxpayers.