The New Nation - Internet Edition

AFP, Wellington

New Zealand's Prime Minister Helen Clark called general elections for November 8 Friday with her Labour Party behind in opinion polls amid a slowing economy and her foreign minister facing the axe.

Clark, bidding for a fourth straight victory, told a press conference she believed the campaign would be a battle of trust.

"It is about which leader and which major party we New Zealanders trust our families' and country's future with," she said.

Opinion polls have shown Labour trailing the main opposition National Party for several months, although the gap narrowed to 6.5 percentage points at the start of September from 16 points earlier in the year. "What I see is that as the election nears people are focusing very much on what the real choice is. And at that point it comes down to what matters most to our families and our communities," Clark said. The timing of the announcement came at the end of a tumultuous week for the government, with Foreign Minister and coalition ally Winston Peters embroiled in a row over political donations.

The November 8 election date favours the government by giving it time for October 1 tax cuts to have an impact, which Clark hopes will eat further into the poll lead held by National leader John Key and his party.

The economy is likely to be a central campaign issue, with the Reserve Bank of New Zealand pointing Thursday to a "marked slowdown."

It said activity in the national economy was likely to have contracted in each of the first three quarters of 2008.

But there was good news for the government when the bank unveiled a bigger than expected interest rate cut, sparking an immediate fall in home loan rates at most banks.

Clark still has to contend with the messy situation surrounding Peters and the saga of undisclosed funds.

Shipping billionaire Owen Glenn has produced phone and email records which he says backed his claim that Peters asked for a 100,000 dollars (65,000 US) donation. Peters has denied the claim.

Clark has described the evidence against Peters as "disturbing," but held off ruling on his future because of the conflicting testimonies.