The Niue government intends using money from a trust fund to buy a property in Thorndon in central Wellington, New Zealand, to combine accommodation for the High Commissioner and office space for the island's diplomats.
Niue is self-governing in free association with New Zealand, with New Zealand providing large budgetary support.
Niue's government is selling a modest property in Wellington to cover some of the estimated cost of more than $US2 million for the new High Commission.
The Niue Trust Fund was started six years ago with the bulk of the money coming from New Zealand's aid allocation to the island. Australia also contributed substantially.
Radio New Zealand International reports the aim is to build it to a point where Niue can live off the interest and be less reliant on annual aid handouts.
There has been criticism that the fund should not be spent on buildings in Wellington, but High Commissioner Sisilia Talagi says it would be an investment.
"The relationship with New Zealand and Niue is not going to go away. It will always be there," he said.
Opposition MP Terry Coe says he's been approached by people wondering why the money is not going to solve some of the critical issues on the island.
He says the building might well be an investment, but it's comments that "an extravagance" the island cannot afford.
"The thing is, you see, the state of our roads and the education system and the wages for the public servants etc and the other infrastructure (which) is in very poor condition," he said.
"We should be doing those things up with that money and bringing it here so that when we do use it it circulates around on the island and benefits all of the people."
Radio New Zealand International reports funds from the trust cannot be used without the approval of the trustees.