The planned tour, featuring two Tests and three one-day internationals in New Zealand last December was called off after the government decided to withhold visas for the Zimbabwe players.

The government's stance was in reaction to what it termed human rights abuses in Zimbabwe but left New Zealand Cricket (NZC) financially vulnerable and originally facing a gross loss of close to two million dollars.

That was later reduced to 406,000 dollars after NZC negotiated for the West Indies to play an extra Test when they toured New Zealand in February-March this year.

NZC chief executive Martin Snedden said the amount paid by the government was what his organisation had claimed.

In announcing the compensation payment, Finance Minister Michael Cullen said the government considered the tour by Zimbabwe was inappropriate because of the Zimbabwean government's continuing human rights abuses.

"The Labour-led government made an important stand over this tour in order to send a strong message to Robert Mugabe's government over its appalling human rights record and continuing abuse of democratic principles," Cullen said.

"It is only fair that we now compensate New Zealand Cricket."