KEY POINTS:
Labour is regaining lost ground against National, but still faces the disturbing prospect of its rival being able to govern alone if its support in a new Herald-DigiPoll survey translates into votes at next year's election.
The poll, taken this month, shows National steady on 48.5 per cent support and Labour climbing slightly to 42 per cent - narrowing the gap between the two major parties to 6.5 points.
Two parties now in Parliament would be ousted if election voting matches the poll figures.
The Greens and New Zealand First would not get over the 5 per cent party vote threshold.
It is the second consecutive month in which Labour has edged closer to National, which had earlier enjoyed a yawning advantage over Helen Clark's party.
A period of wide media coverage and the launch of a series of flagship policies - including KiwiSaver and 20 hours' free early childhood education - may have played a role in Labour's improvement.
The Prime Minister last night welcomed the poll figures.
A spokeswoman for Helen Clark said she felt the result was humbling, "because the Government has been working through some difficult issues".
The Prime Minister believed Labour had been setting the political agenda with some positive policies while National leader John Key had been "missing in action".
Helen Clark has enjoyed a considerable amount of the spotlight over the past month.
She has launched Labour's July 1 policy package, announced the awarding of a Victoria Cross to Corporal Willy Apiata, toughened sanctions against Fiji and moved quickly to visit flood-stricken Northland.
Mr Key has been out of the country twice, visiting Washington and Canada and then taking a family trip to Hawaii during the parliamentary recess.
Helen Clark has shot ahead of Mr Key in the preferred Prime Minister polling.
The National leader is down almost five points to 37.9 per cent support, against the Labour leader's 48.7 per cent.
The poll of 788 respondents was taken between July 5 and 19 and has a margin of error of 3.5 per cent.
Mr Key said last night he was comfortable that the overall polling trend was "in the right place" for National.
"If you look across all the polls that have been conducted in the last month or so, across a huge variety of polling agencies, they indicate we are fairly close to 50 per cent," he said.
"That's fairly encouraging."
Should National convert that support into votes next year, it could well be able to govern alone if it wanted to do so.
The latest poll would give National 63 seats in a Parliament of 124 MPs - giving it a clear majority.
But that outcome depends on New Zealand First and the Greens being ejected from Parliament.
Smaller parties usually receive a boost during election campaigns as they gain greater exposure.
New Zealand First, stuck at a rating of 2 per cent in the party vote stakes, will take some heart from leader - and Foreign Minister - Winston Peters' rating of 7 per cent in the preferred prime minister poll.
This could be read as a hint that he has the capacity to lift his party past the 5 per cent threshold.
Mr Peters may have won some favour from his call for action to stem the New Zealand dollar's rise and halt Reserve Bank interest rate rises.
The factor of the economy may yet be to fully play out on the political stage.
The Reserve Bank is tipped to raise interest rates further on Thursday, and the New Zealand dollar is nudging new post-float highs as it hovers just below US80c.
