Politicians in New Zealand realised they could not leave responsibility for school places to the market after introducing open parental choice five years ago.
The move put acute pressure on the older inner-city schools, which were usually single sex and with a good reputation while outer-city schools with poorer reputations struggled.
Some rural schools experienced difficulties in remaining viable as rolls fell, partly because of the willingness and ability of parents to drive their children to more popular schools.
In New Zealand, responsibilities for education are shared between the Ministry of Education, which owns the school buildings, and boards of trustees, who are responsible for school management and pupil attendance.
Open parental choice was introduced when rolls were growing in North Island and the cities, but falling in the more rural South Island.
Before 1991, the country was organised into catchment areas or zones. Parental choice was largely a matter of where you lived. A popular school could only offer spare places after it had met its obligations to take children who lived in its zone. The spare places then had to be allocated through aballot.
Because of the problems that open parental choice threw up, school improvement programmes have been introduced to revive schools with falling rolls in areas of rising pupil numbers.
"Funds have also been set aside to allow popular schools to expand in response to the exercise of parental choice.
The Audit Commission, however, said: "There is a more fundamental recognition that the ministry cannot leave the situation to the market.
"Rather, there is a need to discharge a planning role, not only in assessing demographic changes and teacher supply, but also in providing buildings.
"The New Zealand experience emphasises that although parental choice is popular with satisfied parents, it is no panacea for the provision of quality education to the entire school population.
"The education system need supplementary programmes to deal with both unpopularity and success and ensure pupil participation and achievement.
"In short, having dismantled much of its capacity to plan and to intervene, the New Zealand education system is re-inventing the means to ensure that the benefits of parental choice are not neutralised by any consequent social and financial side-effect."