KEY POINTS:
Prime Minister Helen Clark says the election campaign will put space between Labour and embattled support partner New Zealand First, but National says they are "joined at the hip".
An opinion poll last night showed both parties appeared to have taken some damage from NZ First's undeclared donations scandal, but Miss Clark today said she hoped the election campaign would put a line through voters' association of Labour with the minor party.
"I would say that once the election campaign is called then everyone is competing with each other," she said on Radio New Zealand.
"You go from a position where you have a confidence and supply partner which works with you on some issues and not others to a position where everybody is out there paddling their own waka towards the finishing line and that changes the dynamic."
Miss Clark reiterated she would allow NZ First leader Winston Peters to keep his ministerial warrants while the Serious Fraud Office, police and privileges committee conducted investigations, unless there was a "devastating reason" to immediately sack him.
Miss Clark has been criticised by her opponents for not holding Mr Peters to the same standards as Labour ministers.
But Miss Clark said she did not believe National leader John Key's pledge not to work with Mr Peters after the election.
"If Winston Peters was the difference between him and political power he would do his best to get his support."
But Mr Key today reiterated National would not do a deal with NZ First even if it meant forgoing power.
"If you look at the scenario that could theoretically be painted where he holds the balance of power, he's not going to be coming to National, he's going to be going to Labour," Mr Key said.
"They are joined at the hip."
Miss Clark said she would be watching the evidence of Mr Peters' lawyer Brian Henry to the privileges committee tomorrow night very closely.
Mr Henry will have to try and explain to the committee how an email from him to billionaire Owen Glenn in which he provides bank details for a $100,000 donation and refers to a phone call between Mr Glenn and Mr Peters minutes earlier does not prove Mr Peters solicited a donation.
Mr Peters and Mr Henry have given conflicting evidence on the email.
Mr Henry has repeatedly said the "my client" referred to in the email is another client, not Mr Peters.
But faced with phone records linking the email to a call between Mr Peters and Mr Glenn, Mr Peters acknowledged to the privileges committee last week it was possible it was him.
The committee has said it will report back on its inquiry into whether Mr Peters should have declared the $100,000 donation, which helped pay his legal fees, as a pecuniary interest, next week.
- NZPA
