However, the pledge to provide a separate pathology laboratory and 24 mental health services for older people (MHSOP) beds has also drawn criticism for a "chopping and changing" stance on necessary services.
Grey Power Otago president Jo Millar was among those who voiced approval following Health Minister Dr Ayesha Verrall’s announcement yesterday, saying she was "very delighted".
Mrs Millar said mental healthcare for older people was a significant issue, and she was pleased the number of MHSOP beds would double from 12 back to 24.
The beds had clearly always been necessary, as fewer beds would not mean a corresponding drop in demand, she said.
"One has to ask why they were even considered being removed in the first place."
This had caused a lot of stress and worry, as well as costing time and money.
The chopping and changing was "very frustrating".
"At the end of the day we actually put money into consultants and the redesigning of buildings and areas, that we could have put back into the original hospital."
Immediate past president of the New Zealand Institute of Medical Laboratory Science Terry Taylor said the announcement seemed positive.
It appeared it would be in the wider hospital precinct area, which was important because of how interconnected the work was with other hospital services — the majority of clinical decisions relied on laboratory testing.
"As long as the pathology sector expertise is being used, we as a profession will be happy."
Past underinvestment had to be reversed to create a sustainable tertiary pathology facility, and a fit-for-purpose service, he said.
Last December $90 million in cuts were announced along with a $110m funding boost to address a $200m budget blowout.
Among the changes, MHSOP beds were reduced and space for pathology cut from 1300sq m to 350sqm.
Te Whatu Ora Health New Zealand defended the change earlier this year, stating that full pathology services would be maintained through off-site provision.
Following backlash to the cuts, Dr Verrall announced in April that $10m had been put back into the new hospital budget, and the issue of MHSOP beds and pathology space would be investigated.
The pathology review found the laboratory area allowed for in the hospital plans was not going to be big enough, Dr Verrall said yesterday.
"The most efficient way to deliver pathology services is a pathology lab no more than 1000m from the hospital."
If Labour was successful in next month’s election, the laboratory would be funded from the health capital envelope and connected to the hospital via a pneumatic tube.
"Te Whatu Ora will work with local clinicians and its pathology provider on where the laboratory will be located."
Locating the laboratory outside of the hospital would free up space, so that a dedicated 24-bed MHSOP unit would be operational when the hospital opened, she said.
Dunedin Mayor Jules Radich said it was excellent news.
The council has been running a campaign against the cuts since March.
"This is what the community, pathologists and stakeholders have been calling for, so it is very pleasing that the minister and government have listened," he said.
"I think that the residents, nurses and doctors of Dunedin can congratulate themselves for contributing to a successful result."
Taieri MP Ingrid Leary said local Labour MPs had been pushing hard behind closed doors for months leading to the announcement.
"As government MPs the reality is we have to fight our battles away from the public eye, but we see this as a victory for Dunedin, and we’re really proud of what we’ve been able to achieve."