Grant Robertson

A Labour MP has told a Grey Power meeting that the top personal income tax rate will remain below Australia's under a Labour government.

Party leader Phil Goff has said the top rate would increase under Labour to help pay for its proposed tax freeze on the first $5000 of income.

He said it would affect New Zealanders earning "comfortably into six figures" but the figure and the threshold had not yet been decided.

Labour's senior citizens spokesman Ross Robertson today told a Grey Power meeting in Papatoetoe, south Auckland, that a limit to that increase had been set.

He said the top rate "will be less than the top rate in Australia. The rate there is 45 percent."

A spokeswoman for Mr Goff said the party leader had previously indicated the top rate would be less than Australia's, and Mr Robertson's comments were in line with policy.

Prime Minister John Key earlier told the meeting he believed the top rate would need to be 58 percent to pay for Labour pledge for a tax-free first $5000 of income, removing GST on food and extensions to Working for Families and paid parental leave.

Mr Key said if Mr Robertson's statement about the rate was correct, "that means they've got a hole in their accounts".

"So if the top rate is set at 45c not 58c, they will have to either borrow more money or put on another tax," he said.

"I suspect what's going to happen is if there's a Labour-Greens-NZ First government there'll have to be a capital gains tax, and I suspect that's what (NZ First leader) Winston Peters is signing up to with Labour and the Greens," he said.

"National won't be putting on one."

Mr Goff has said a capital gains tax isn't on Labour's agenda.

Mr Key yesterday ruled out working with New Zealand First should it hold the balance of power, saying Mr Goff would be Prime Minister if NZ First held the balance of power.

Today he said it was nothing personal, but that he didn't agree with many of NZ First's policies or Mr Peters' style while in government.

"It's like marrying someone you don't love -- it won't last," he told the meeting.

He later told media he wasn't worried about losing support from retired people due to this.

"One or two of them obviously would prefer we did do a deal with Winston Peters because historically Grey Power's been an important base for him," he said.

"But I think retired New Zealanders can understand the position the country's in. They understand that putting more debt on their children and grandchildren is not a good thing.

"I think they appreciate at least that we're clear and upfront about what we're doing. Not all of them will agree with us, but I don't think they like ambiguity more than anyone else so at least we've been clear and upfront about that."