NZ First cleared as Labour picks up in the polls

New Zealand First leader Winston Peters' re-election chances have been given a big boost just as opinion polls show Labour gaining support and closing in on National.

The Serious Fraud Office yesterday cleared NZ First after investigating two donations to the party.

It found the money was used for the purpose the donors -- Sir Robert Jones and the Vela family -- intended.

It did discover NZ First might have breached electoral laws in the way the donations were handled, but that is a relatively minor issue and is being dealt with by the Electoral Commission.

Mr Peters stood down from his foreign affairs and other portfolios while the SFO inquiry was carried out, and Prime Minister Helen Clark took over.

She said last night she would continue to hold his portfolios because other inquiries were still going on and the election was close.

Mr Peters said the SFO inquiry had been a waste of time, and he had always known there would not be a fraud case to answer.

National, which has ruled out working with NZ First after the election, has held a strong lead over Labour for most of this year and some polls have put it more than 20 points ahead.

But two polls within the space of a few hours yesterday changed that.

The New Zealand Morgan poll showed a dramatic change, with Labour gaining support, National losing it and a gap of just three points compared with 11 a fortnight ago.

The sudden change in support trends was doubted -- until TV3 came out with a poll showing Labour up three points to 39 percent and National down four to 45 percent.

The gap in the TV3 poll was six points compared with 13 two weeks ago.

Miss Clark said the polls showed voters were thinking seriously about risking a change of government.

She said voters knew Labour had run a strong economy for most of the past nine years and trusted it to deal with the financial crisis.

Both polls were taken just before National released its tax cuts programme, which has been criticised for cutting down KiwiSaver benefits and ending tax rebates for research and development to pay for them.