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The money would help complete the design of — and implement — a new human papillomavirus (HPV) test, Associate Health Minister Ayesha Verrall said yesterday.
HPV is the cause of 99% of cervical cancer and Dr Verrall said the new self-testing kit would make a "real difference".
The new test, which will replace the current smear test, is a simple and quick swab that women can choose to do themselves.
"This will help to reduce the barriers to getting screened," Dr Verrall said.
Advocates have been calling for the Government to fund self-testing kits for some time.
Dr Verrall said initial modelling predicted the move to HPV screenings would prevent about 400 cervical cancers over 17 years.
"It will save around 138 lives," she said, adding that a third of those cases prevented and lives saved would be Maori.
The change will come into effect in 2023.
Dr Verrall said the Government had been working on the programme for "a long time".
"I’ve been a doctor for a long time and met many, many women affected by cervical and breast cancer. I think today’s announcement is for all of them."
As well as the new HPV test, the Government also announced almost 300,000 extra women would be eligible for potentially life-saving free breast scans because of a $55million upgrade of the Government’s aged IT systems.
The funding is part of this month’s Budget and is one of the first funding initiatives to be announced.
The new IT system will help identify and enrol eligible women into the free mammography screening programme.
The existing system operates as an "opt-in" model, in which women choose to enrol for breast screening via their GP or by calling an 0800 number.
But this model relies on women knowing they are eligible for free breast screening and making an appointment themselves.
Dr Verrall said the current "ageing" IT system put the whole programme at risk.
The national breast-screening programme, Breast Screen Aotearoa (BSA), provides free mammography screening every two years to women aged 45 to 69 who have no symptoms of breast cancer.
The upgrade would better equip the system to identify women not screened at present, Dr Verrall said. About 271,000 women were in this category.
The new system would directly invite those women who otherwise would have missed out by running targeted campaigns.
"With more Maori and Pacific women dying from breast cancer compared with non-Maori and non-Pacific women, the new system would allow BSA to identify priority group women who may not already be part of the programme."
Each year in New Zealand, about 3200 people are diagnosed with breast cancer and about 600 die from breast cancer.