KEY POINTS:
At the end of the week from hell, it may be hard to imagine that anyone in the Labour Party is feeling positive about winning a fourth term at next year's election.
From losing a Cabinet minister at the top end to having raffle fundraising declarations questioned at
the other, the week has had major distractions.
But Labour still believes it can overturn National's polls lead.
And it is looking to Britain for policy inspiration and political comparisons and comfort.
One of the main areas being worked on is housing affordability.
New Zealand Labour is watching closely what British Labour is doing on the subject, Prime Minister Helen Clark told the Herald.
Plenty of work is already being done to help people into homes. The new focus is on the supply side of the housing equation.
"If you are pumping in money to support people buying a home but you are still not having enough homes built, all you do is inflate the price," Helen Clark said.
"So you have to look at what will boost supply."
The British Government this week set out a $21 billion plan to get three million more homes built by 2020.
Helen Clark said the Government was taking "a very intense look" at the targets and believed it would be an area of considerable activity.
The plan includes land development incentives for local councils, setting up local housing companies between councils and developers, identifying areas where more "social housing" is needed, and building five new "zero-carbon eco-towns".
Helen Clark said that reports on the New Zealand work would be complete within about three months, that legislation would be needed - presumably passed next year - and that implementation would effectively be in a fourth term.
The other large body of work being undertaken in Wellington is on "sustainability" issues on climate change and carbon neutrality.
Those themes are likely to be a central theme in Labour's re-election strategy.
Labour is taking political comfort from the fact that the star of British Conservative leader David Cameron - the young leader with whom National leader John Key is often compared - is fading.
Cameron became leader in December 2005, shortly after the Conservative's third successive election loss. He turned an eight-point gap behind Labour into a 10-point lead, but has since fallen behind again.
Labour in New Zealand sees parallels with Britain's attempts to portray Labour as the party of substance and policy, and the Conservatives more concerned with style.
A comment by National deputy Bill English to North & South magazine gave Labour valuable ammunition in its efforts to portray Mr Key as "political fluff."
Mr English said: "John just bounces from one cloud to another."
The phrase has been repeated dozens of times since it was published this month.
Labour has won a third term before, in 1943, but hasn't managed it since. While its fate may rest in the hands of support parties, there is huge advantage in winning the contest with National because the biggest party gets the first go at forming a Government.
Victoria University political scientist Jon Johansson says Labour can't be written off until it consistently polls below 35 per cent.
"That's when I think you are justified in saying there has been a permanent shift against a Government. So as long as they're hovering above 35 per cent, there is the potential for a game at the next election.
"If they headed into the next election campaign five to 10 points behind, it's going to be another close election."
One of the qualities of the Government, he said, was its "unbelievable patience" when behind in the polls.
"This is not a Government that panics. They're very patient and have been in this position before, so I do not write off their chances in 2008."
National's enormous lead over Labour in May - 17.6 points in the Herald DigiPoll survey - has narrowed to 6.5 points this month, although the gap is wider in other polls.
Political commentator Colin James said that a rolling average of polls puts the gap at about 12 points.
Since late 2002, National had experienced a strong upward trend, which was continuing, and Labour had had a less strong but continuing downward trend.
The gap widened after the smacking bill but had narrowed again.
"For Labour to have a realistic chance in the next election it has to stop that trend and turn it round by the very latest January or February and then they have to make up about 12 points on National," James said.
Helen Clark said she was taking "a long term view" of the polls when asked if she could close the gap by the end of this year.
"The trends are encouraging. I am mindful that in the last term, things zig-zag. We were behind in July 04, but were well ahead at the end of the year."
Labour was behind after the 2005 Budget and then closed the gap.
"So you have just got to expect a lot of volatility, particularly in an MMP environment."
She also believed the small parties' poll figures were artificially low.
"But in an election campaign when the small parties get more than a level playing field, that usually changes."
- additional reporting: Claire Trevett
