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In a statement, Smith said Parliamentary Service had been conducting "a confidential inquiry into a verbal altercation in my Wellington office last July that has not concluded".
"I was advised on Friday that the inquiry and its details have been leaked to the media for release tomorrow. It is inappropriate for employment disputes to be litigated in public.
"I will put on the record that I regret the incident, I apologised at the time and I apologise again today. I have decided the best course of action for the parties involved, the National Party, my family and myself is to retire now."
Smith has been a National MP for 30 years.
He lost his Nelson electorate in the 2017 election and said he had decided then to retire, but had not decided when that would be.
"It was working for constituents and advocating for the region that I enjoyed most and I have come to realise that the role as a List MP is just not me. I had decided to retire earlier this year and the only question was when."
Smith said he intended to rejoin his family's crane and construction businesses in New Zealand, Australia and in the Pacific.
The next candidate on National's list to enter Parliament is Harete Hipango.