Prime minister Jacinda Ardern had her final day in the capital on Monday before heading home to Auckland in preparation for the birth of her first child on Sunday. She has said she will not hand over power to Peters until she heads to hospital .

However, tensions have arisen as Peters, the head of the conservative NZ First party, refused to back a repeal of a controversial “three strikes” policy. The law, enacted in 2010, set up a three-stage system of increasing consequences for repeat serious violent offenders.

On a third offence, a judge must issue the maximum possible sentence unless the court considers it would be manifestly unjust.

Justice minister Andrew Little called the law the “high watermark of policy stupidity” and many academics and public policy experts have denounced it as ineffective. Little was due to announce the repeal on Monday but instead said NZ First did not back it. “They didn’t want that to be seen as separate from a broader programme of criminal justice reform,” he said.

The leader of the opposition, Simon Bridges, said Little’s backtrack had “underlined cracks in the coalition”.

“We’ll see the power dynamics of that and who’s really in charge,” Bridges told Radio New Zealand (RNZ).

The reversal also comes as Peters files a court case against the heads of the Ministry of Social Development and State Services Commission and the attorney general on behalf of former ministers under the previous administration.

Peters confirmed on Monday night that he was seeking NZ$400,000 in damages for breach of privacy after details about overpayments of his superannuation were leaked to the media last year.

During last year’s election campaign Peters was found to have been mistakenly overpaid superannuation for seven years. The 73-year-old veteran politician repaid the money when the error was found.

Ardern told RNZ Peters would recuse himself from any cabinet decisions to do with his lawsuit and said there were processes for dealing with the issue. “It hasn’t affected the ability of the deputy prime minister to do his job thus far … it’s a private matter not a political matter.”

Ardern told the AM Show this morning that if her pregnancy ran over time she would likely induce labour.

Charles Anderson in Nelson