KEY POINTS:
The National Party will today make it clear it is willing to tolerate bigger budget deficits to reassure voters it will not slash government spending if it wins the election.
In his speech to the party's annual conference, deputy leader Bill English will seek to blunt Labour's arguments that National's plans for further tax cuts will force it to cut public services.
Mr English's speech is shaping up as crucial as National faces pressure to explain how it will fund personal tax cuts as well as keep core Labour policies like Working For Families.
It is the first of a double-whammy of economically-focused speeches from National's leadership team with John Key also set to speak about the topic in his keynote address tomorrow.
Labour has been arguing since May's Budget that there is no room left in the government's books for bigger tax cuts without borrowing.
Central to Mr Key and Mr English's speeches is a view within National that the government's books are strong enough to get through the current downturn and there is no need to panic if operating deficits start to appear in the short term.
"We have a good deal of confidence that we can get through a downturn _ that the economy and the government's books can get through a downturn and back onto a growth path," Mr English told the Weekend Herald. "So I'll be talking about more room to manoeuvre with debt, particularly in relation to infrastructure and how National will handle some red ink."
The comments signal National would be prepared to tolerate more debt in the government's books and Labour is certain to seize on this.
Finance Minister Michael Cullen yesterday predicted Mr English and Mr Key would begin talking about debt at the weekend.
The political argument over debt and spending is set to be a crucial part of this year's election campaign as Labour argues National would borrow for bigger tax cuts _ while National argues it is instead borrowing for long-term infrastructure.
National appears to be confident it can win the argument and to be punting that the public sees it as better a economic manager than its main rival.
Its message that it won't be panicked by deficits is to assure voters that National would not embark on spending cuts like it has in previous times of economic difficulty.
Instead, it will push a longer-term view that the economy and the books can ride through the red ink as long as those in charge hold their nerve.
National's conference kicked off last night with a cocktail party at Wellington's Town Hall, and culminates tomorrow with Mr Key's address.
