Key Points:

National is set to ditch its policy of market-related rents for state houses with leader John Key publicly distancing himself from the party's long-held position.

National introduced market-related rents when it was in government in the 1990s, but welfare groups blamed it for a big rise in child poverty.

When Labour swept to power in 1999, it reintroduced "income-related" rents, under which those eligible for a state house paid rent based on what they earned rather than a market rate.

Labour has frequently used National's policy to attack it as uncaring - most recently after Mr Key's Burnside speech in which he dwelt on the need to tackle the problem of a growing underclass.

However, Mr Key has indicated that National was likely to scrap the policy before the next election.

"I would say I don't favour a move back to market-related rents and I don't think the party will support a move back to market-related rents," he said.

"The caucus has got to discuss that issue in detail, but my view is we shouldn't go back to market-related rents.

"What I'd much rather do is focus the attention on things that we can change and things that will actually make a difference."

The u-turn is one of several Mr Key has made since becoming leader.

The others include lengthening the timeframe for the elimination of the Maori seats and accepting the existence of climate change.

The reversals have been seen as part of a bid to soften the party's image to woo women and urban liberal voters - key constituencies it failed to sway at the last election.

Mr Key said he still believed in selling state houses to their occupants, particularly the 10 per cent already paying market rents.

But under National more houses would be built to compensate, ensuring the overall number of state houses was not eroded. Mr Key said he also believes lowering the tax rate on share investments would be one way to tackle the overheated property market.

Finance Minister Michael Cullen has said that changing the tax regime around property investment is one measure the Government is looking at to make it less attractive.

But Mr Key said he favoured lowering tax on other forms of investment which he believed would be more effective.

"Maybe let's level the playing field in terms of other investment options," he said.

In the United States, President George W. Bush lowered tax on funds and stocks to 15 per cent. Although the cost was only 20 per cent of his overall tax cuts package, analysts believed it would produce about 50 per cent of the overall economic growth. Australia a made similar move last year.