There were many submissions to the 2012 MMP review that expressed frustration at the wasted votes that result from application of the existing 5% threshold. Many were also concerned at the distortions in voting behaviour that result because of the desire to avoid a wasted vote.
Offering a second choice was suggested by a number of submitters, including the following (where a link is shown that will lead to to a copy of that person’s submission:
Among the submission, there were a number of ways suggested for allocating second choice votes. This website proposes a very simple system. Votes for parties that do not make the threshold according to the first choices are reallocated according to the second choices where those second choices are for parties that reached the threshold on first choices. Reallocated votes cannot then bring a party over the threshold. This is a method to ensure that all votes can count. It is not a system of preferential voting. Second choices should normally be given to parties likely or certain to pass the threshold.
The idea of two choice party voting was mentioned in an 2012 MMP review document entitled ‘Other_Issues’ . It is mentioned only briefly, and only under an unrelated heading: ‘ Use of a preference voting system for electorate contests—‘.
It may have been better to consider these proposals under a relevant heading, perhaps as part of the discussion of the threshold.
Here’s the final report: Final_Report_2012_Review_of_MMP
You could search submissions for yourself at the page below, except that the link no longer works(as at 31/10/2020):