Both David Shearer and John Key took to the podium today to lay out plans for the country, with the Labour leader signalling a firmer line for education and welfare, and the Prime Minister unveiling public sector plans.

In his first major speech as Labour leader, Mr Shearer pinpointed education as the key to New Zealand's future, saying opportunities were being missed.

"There is so much more we can do than we're doing right now," he told a business breakfast in Wellington.

"Instead of the distraction over national standards, we need to focus on how we get the highest quality teachers in the world and the best performing students."


Likening the current system to a marathon, Mr Shearer said there were some high-achieving pupils and schools leading the race into the stadium.

"But if you track back along the rest of the field, it doesn't look so world class. Many of them are coming in hours later. Many of them are giving up before the finish. And too many of them aren't even turning up at the starting line."

Mr Shearer said work could be done to develop professional skills, but New Zealand could not afford to have "bad teachers" in classroom.

"As a parent, I want to put badly run schools on notice."

Mr Shearer also indicated a tougher stance on welfare, saying that while the needy deserved a share of the pie, everyone needed to contribute.

"Everyone who can help to make that pie needs to be involved, and fairly rewarded for doing it," he said.

"The government's part is to ensure that this transition happens - through up-skilling, education and a nudge behind those not meeting their side of the contract."

While Mr Shearer expressed a preference to retain Labour's policy for a capital gains tax, saying the plan was "pro-growth, the party's pre-election plan for a tax-free first $5000 looks set to go.

"I would want to ask whether a tax-free zone that gives everyone the same sized tax cut is going to be as much of a priority," he said.

"I believe we can look after everyone better, not by cutting taxes, but by earning more as a country and making sure that everyone gets a real chance to earn their share."

Mr Shearer stressed that the policy matters would not be confirmed until much closer to the 2014 election, but Labour's plans would be detailed further in series of speeches in the coming weeks and months.

Today's speech was met by criticism from Mr Key, who described his counterpart's efforts as "underwhelming".

The Prime Minister said most politicians had very similar objectives - "that kids get a decent education, that we all live happy and healthy lives, we all have good secure jobs and are safe in our communities".

"The issue is the how and there was absolutely no how in that speech from David Shearer today, not one bit of how."

Meanwhile, Mr Key this afternoon addressed the Chamber of Commerce in Auckland, where he confirmed plans to merge four government departments.

The new Ministry of Business, Innovation and Employment will take in the building and housing, and labour departments, as well as the economic development and science and innovation ministries, and will start up on July 1.

Mr Key said previous department mergers had made for more efficient workings, and he expected the new ministry to do the same.

"It will strengthen the public service's ability to work on business policy, regulation and engagement, so the Government will get a much more co-ordinated and focused resource," he said.

"And it will be easier for New Zealand businesses to engage with government, rather than dealing separately with a number of different agencies when they are seeking advice or support."

Mr Key also announced a new cap on core government administration, at a lower level of no more than 36,475 full-time equivalent positions.

"The cap will count most people working in government departments and in some Crown entities, but it does not include frontline staff like teachers, police officers, hospital staff, or prison officers," he said.

Although the Government has said it is soon to say how many jobs might be lost in the merger, state sector union the Public Service Association (PSA) has already voiced concern.

PSA national secretary Brenda Pilott said that if the new ministry was job cuts in disguise, it could do more harm than good.

"A state sector has been in a state of flux for years and it's been the object of public ridicule under this Government," she said.

"If John Key wants a dynamic state sector, his first task is to lift staff out of survival mode, because he needs them."