Key Points:

Viewed in isolation, the kerfuffle over Air New Zealand's ferrying of Australian troops part-way to Iraq is a passing political storm which has done nothing more than rattle the fine china tea cups at the Ministry of Foreign Affairs.

For anyone still wondering what all the fuss is about, its significance lies in what it says about the Labour-led Government. And it says an awful lot.

A week or so ago, New Zealand First's Ron Mark got up in Parliament to complain about the minor parties being shut out of political debate by the all-consuming power struggle between Labour and National. The tempo was such, it felt like the House was already winding up to an election.

That election is still 15 months away - and Labour is hardly likely to bring it forward.

But Mark was right. Labour and National are going hammer and tongs at each other with such intensity that it almost feels like the business of government is being put to one side, such is the major parties' concentration on positioning themselves on the right side vote-wise of every argument, issue or crisis to explode on to the political agenda.

And there is no let up. Be it David Benson-Pope's memory, the State Services Commissioner's memory, the (previously) high dollar, preventing child abuse or the embarrassment of the national airline undermining the foreign policy fundamentals of its majority Government shareholder, Labour is clearly fed up with constantly being forced on to the defensive.

With electoral defeat looming ever closer, Labour is shifting into survival mode, with trigger-happy ministers shooting first and asking questions later.

This was typified on Wednesday by Defence Minister Phil Goff letting fire with both barrels, firstly at Air New Zealand for flying troops into Kuwait, and then the Ministry of Foreign Affairs for failing to alert ministers to a breach of Government policy forbidding any involvement with combat operations in Iraq.

Goff's deliberate front-footing was intended to ensure no one thought Labour might be turning a blind eye to how Air New Zealand made its money.

News of the charter flights had only just broken, however. Goff was flying blind. At that point, it was not clear exactly who should shoulder responsibility for the fiasco. As Michael Cullen admitted in Parliament the next day, Goff did not have all the facts to enable him to rush to judgment.

It subsequently emerged that Air New Zealand had played things pretty much by the book. Its chief executive, Rob Fyfe, had contacted Simon Murdoch, the head of Foreign Affairs, to outline the airlines's intention of tendering for charters to carry Australian Defence Force personnel to Kuwait, the "hub" from which those personnel are picked up by military transport for the short hop into Iraq.

Murdoch could see no diplomatic or policy constraints on the airline submitting a bid. He asked the airline to keep in touch. He did not inform his minister, Winston Peters.

Air New Zealand subsequently told the ministry that the contract would soon be finalised. That information was not passed to Murdoch. Again, Peters' office was not informed.

Air New Zealand's mistake was not telling Cullen, who, as finance minister, is responsible for the Government's 82 per cent shareholding in the airline.

Had the airline done that, apologies would have been due from Goff. Then again, had Cullen got even a sniff of the airline's thinking, he would have made known the Government's displeasure.

Goff's apology should be to Peters. Not for the first time, Goff has trampled all over Peters' portfolio. Previously, it has been as the reflex of a former foreign minister. This time, his motives were purely political.

Peters seemed remarkably relaxed about the incursion, though he pointedly mentioned he would get all the facts before apportioning blame.

However, clearly in Labour's view, Peters was far too relaxed about Murdoch's inexplicable error of judgment in failing first to recognise the potential for political embarrassment if the flights went ahead and then not alerting his minister.

Peters stood by his chief executive, accepting his apology and declaring that there the matter should rest. It was a show of respect and loyalty to one of the country's most senior, most diligent and normally most dependable of public servants. However, standing by your officials has gone out of fashion in the Beehive where the default setting for any crisis is to see how much blame can be attached to officials, rather than ministers accepting responsibility.

This has gone a step further in Murdoch's case. Even though he has taken the rap, Murdoch and other officials in the know have been accused of "ambushing" ministers, while a visibly angry Cullen noted Murdoch's lapse would surely be taken into account when his performance was next reviewed by the State Services Commission.

Labour's fury was genuine, but exaggerated for effect.

Iraq serves as a fundamental point of difference with National. Labour was unambiguous in its opposition to the United States-led invasion of Iraq. National endorsed it.

However, that endorsement has become one of Labour's most vital weapons in warning voters that however warm and cuddly National might appear under John Key's leadership, some things do not change.

Murdoch's crime is to have set events in train which risked blurring that point of difference, if only temporarily.

To a degree, however, Labour has itself to blame. Handing Peters the foreign affairs portfolio and allowing him to function as a minister outside Cabinet may have been Labour's passport back into power in 2005, but it has now proved not to be cost-free.

The bill landed with a thump this week.

Peters' allocation of the job of High Commissioner to the Cook Islands to one of his MPs is the worst kind of look for a Government that is desperately trying to avoid being categorised as beyond its use-by date.

Moreover, on the one occasion when Labour could have done with one of Peters' standard tirades to put down Air New Zealand, Murdoch and other officials, Peters did not deliver, instead managing things in a calm, capable fashion.

Peters could afford to be relaxed because Iraq is of little consequence for NZ First when it comes to winning votes.

Labour's frustration at that was evident in Goff saying that officials should not only have informed Peters about the charter flights, but the Cabinet as well.

That suggests some concern that Peters not sitting at the Cabinet table means vital information is not reaching other ministers.

And that begs another question, one which Labour no doubt is asking itself. Would Murdoch's blunder have occurred if Goff was still foreign minister? Labour's likely answer is that it wouldn't have.