The policy would require schools to use recognised assessment tools and teacher judgment to determine how a child is achieving.
It has been welcomed by sector leaders who say it is much more in line with what schools are trying to do.
Ian Leckie, president of educational sector union NZEI, said the policy effectively spelled out the demise of National Standards as he doubted many would choose to keep them on.
"They will go down as a failed educational experiment - and a hugely expensive educational experiment."
Under Labour's policy, Mr Leckie said, schools would monitor and track student progress against their own school expectations instead of being required to implement National Standards.
"This would mean schools could refocus student learning back on the curriculum and allow them to rely on robust and tested assessment practices to measure student achievement."
Principals' Federation president Peter Simpson said Labour's policy would put the curriculum at centre stage again.
He said 85 per cent of principals have no confidence in National Standards and simply wanted to get on with helping children learn - not fighting political battles.
Ms Moroney said children learn at different rates and in different ways so the "one size fits all" approach to education failed children.
The division created by the Government with school communities by imposing unworkable "National Standards" was also detrimental to children's education, she said.
"National's standards are not moderated. They differ from school to school, and are therefore neither national nor standard."
Ms Moroney said the $36 million earmarked for National Standards in the next financial year would instead be re-directed to help students who were under-achieving and to create the conditions where all teachers could excel.
The 5-step plan
National Standards will no longer be mandatory. Schools will instead:
* Determine the curriculum level a child is achieving.
* Show a child's rate of progress between reports over the course of a year.
* Identify children not achieving within the curriculum level appropriate to their year at school.
* Decide and report the next learning steps.
* Report this information in plain language to parents at least twice a year.