A decision by the Electoral Commission to refer a parliamentary-funded postcard from Labour to the police is expected to raise questions again about the extent of election advertising that will be funded by taxpayers in the run-up to the election.

The postcard in question opposed asset sales and was funded by Labour's parliamentary budget.

The Electoral Commission believes that because the postcard was election advertising as defined by the Electoral Act it needed a promoter statement on it, saying who authorised it.

Labour's statements on the issue suggests it thinks that simply because it was funded by Parliament, means it cannot be election advertising.

"Labour had taken the view that the flyer was not an election advertisement under the Act, in part because it had received prior authorisation from the Parliamentary Service for its publication," campaign spokesman Grant Robertson said.

Labour justice spokesman Charles Chauvel said it was an honest mistake and the party's processes had changed.

But Labour, National and other parties are likely to avoid similar embarrassment by putting a promoter statement - which is required on all election advertising - on most parliamentary funded material.

That is likely to mean the political parties end up producing politically stronger advertising using taxpayer funding, because they will be able to do so with impunity.

The Parliamentary Service approves party advertising unless it explicitly touts for money, votes or membership.

That gives a party enormous scope to produce election advertising within the rules.

The Electoral Commission does not take account of whether it is funded by Parliament in deciding if a party's ad is election advertising. But an ad must have a promoter statement, whether or not it is published within the three-month period in which election spending is regulated.

If all parliamentary material is covered as potentially election advertising, there is no legal disincentive to be restrained in the political message.

However after August 26 any parliamentary funded advertising would have to be counted in the party's election expenses return.

Controversial amendments to electoral law was made by Labour in the wake of former Auditor General Kevin Brady's finding that parties unlawfully spent $1.2 million of taxpayers money at the 2005 election, and a clandestine funding campaign by the Exclusive Brethren in support of National.

National gained largely cross-party support for the current law.

Prime Minister John Key's chief of staff, Wayne Eagleson, held a cross-party meeting at Parliament on July 1 to discuss the Electoral Act and he would call another in the coming week.

He said the first meeting was to ensure there was as much confidence in the electoral system as possible. He thought it would be useful to have a shared view about how it would operate in practice.

Asked if the Electoral Act was being interpreted in the way he thought it should be, he said: "At this stage we haven't seen anything that would suggest it is not. And to the extent that there is any uncertainty, National's approach is to adopt a pretty conservative approach to make sure we don't fall foul of the law."

DEFINITION FROM ELECTORAL ACT
In this Act, election advertisement -
(a) means an advertisement in any medium that may reasonably be regarded as encouraging or persuading voters to do either or both of the following:
(i) to vote, or not to vote, for a type of candidate described or indicated by reference to views or positions that are, or are not, held or taken (whether or not the name of the candidate is stated):
(ii) to vote, or not to vote, for a type of party described or indicated by reference to views or positions that are, or are not, held or taken (whether or not the name of the party is stated).