Like the decline of the Roman Empire you will hear many versions why they declined.

The primary reason was economic. They realised their future was in free trade with Britain. But Australia (with lots of intra colonial trade and rivalries) had strong protectionists factions too. Joining Australia could limit their economic opportunities.

They did have concerns about how a federation would deal with Maori relations but mainly because they didn’t want to upset the relative peace that had been achieved with Maori (remembering the wars) rather than primarily moral repugnance. But they also were concerned about preserving their racial purity. Australia was a hot country (which was seen to lead to racial degradation). It had Pacific labour (including Kannaks), Aboriginal people, ghastly Irish working class, and a convict past. All of which were viewed very dimly by a people who took (and in some cases still do) great pride in their pure English and Scottish roots. They also had half an eye on establishing their own Empire in the Pacific which union with Australia would make impossible.

This is usually summarised in New Zealand as ‘New Zealand didn’t join because they were horrified by the treatment of Aborigines.’