The Labour Party is understood to be considering ditching its pre-election policy of a tax on incomes over $150,000 and scrapping its proposal to expand Working For Families entitlements to include beneficiaries, as the party looks to reposition itself towards the centre.

And the axe is hovering over policies of GST-free fruit and vegetables and a $5000 tax-free zone, as they add little to leader David Shearer's vision of a skilled, export-driven economy.

Yesterday Mr Shearer used his first major speech outside Parliament as Labour leader to move away from the Greens, hinting his party would harden its stance on welfare and shed the policy of a tax-free income zone - which would cost $1.4 billion a year.

Mr Shearer said no final decisions had been made, but every policy should be viewed through the lens of building a creative economy, where innovative exports sat alongside agriculture as the main economic pistons.


"That's the sort of lens that I'd be using to look at those policies, and we'll be doing that in coming weeks."

The cornerstone of his vision was an education system that invested heavily in early childhood education, placed a high value on teachers, and wrapped support around teenagers not in work or training.

Though he wouldn't be drawn on where he stood on GST-free fruit and vegetables or extending Working For Families to beneficiaries, both policies would struggle to be justified as adding to a high-skilled economy.

Mr Shearer said a capital gains tax was "pro-growth" which helped to shift investment to the productive sector, and the extra revenue could be used to lower other taxes.

He would not comment on which taxes could be lowered, but the party could ditch its pre-election policy of a tax on incomes over $150,000, especially as the wealthy would be hit more by a capital gains tax.

In his speech, Mr Shearer signalled a tougher stance on welfare while taking care of those in need.

"They deserve a share of the pie. And if people fall on hard times, we will help. But equally importantly ... everyone who can help to make that pie needs to be involved, and fairly rewarded for doing it."

Labour would look at how professional development, pay and recruitment could be used to make teachers feel valued.


He said teachers' salaries could increase, but was careful not to reveal his thoughts on the issue of performance-based pay.

Prime Minister John Key was quick to dismiss the speech as goals that every MP would agree with, regardless of political colours.

"The issue is the 'how' and there was absolutely no 'how' in that speech from David Shearer.

"Saying he wants kids to do well at school and saying he wants to do more in the education system but not telling us how he's going to do it ain't going to cut it in my book."

* Probably scrapping: $5000 tax-free zone, GST-free fruit and vegetables
* Considering scrapping: Tax on incomes above $150,000, extending Working For Families entitlements to beneficiaries
* Keeping: Capital Gains Tax