What is imputation credits?

Imputation credits regime was introduced in NZ in 1988. It is a system which avoids double taxation on already taxed income. So, when NZ Company issue you a dividend this is reported in your tax return as income, and imputation credits attached with that dividend are used as tax credits to avoid double taxation.
Section LA5 (4) ITA 2007: permits imputation credits to be used as credits to settle one's income tax liability.

What is franking credits?

Franking credits is similar to what we have in NZ as imputation credits. In Australia imputation credits are referred as franking credits.
NZ and Australia both have similar imputation credit tax regime which ensures the taxes paid in local jurisdiction are not paid twice.

Can Franking credits be used by NZ investor in NZ tax return?

The common international practice is the relief of double taxation is only provided to local taxpayer and taxes paid in foreign country are not permitted as imputation or franking credits.
In general terms it means there is a single layer of taxes on local investment but double layer of taxes on foreign investments. So, if you are a NZ investor invested in Australian equities receiving dividend and franking credits, these franking credits are no use to you and you cannot claim as credits in NZ tax return.

Where to from here?

With increased trans-Tasman harmony many New Zealanders are investing in Australian equities and vice versa, but it is indeed discouraging for NZ investors to invest in Australia when the income is taxed twice.
NZ Government is actively working on this issue and it is expected sometime soon Australian franking credits will be used in NZ as imputation credits. 
Australia and NZ are some of the countries left in OECD using imputation regime, Europe is no longer using imputation regime system. If franking credits are permitted as imputation credits in NZ it would be great for Trans-Tasman economic harmony.