The MP responsible for creating Kiwibank, Jim Anderton, says it would be economic vandalism to sell off the only strategic asset in the finance sector that is owned by New Zealanders.
Finance Minister Bill English has floated the idea of partial asset sales in a second term, and has used Kiwibank as an example.
Mr English said National would stick to its policy of no asset sales in this term, and would not proceed without a mandate from New Zealanders.
Progressive Party leader Jim Anderton championed the idea of the bank, which was launched in 2002.
He says if Kiwibank was partially sold to small, mum and dad-type investors, it would soon be bought up by large overseas shareholders.
Mr Anderton says he believes the Government plans to sell it off to pay for tax cuts in the Budget.
However, the head of the Stock Exchange, Mark Weldon, says the Government would have complete control over any partial float of a state owned enterprise (SOE), so it could put share caps on ownership and, if it wished, allow only New Zealanders to become shareholders.
Mr Weldon says partial ownership of state owned enterprises would mean badly-needed growth in the economy.
And the head of a Government taskforce on capital investment is welcoming the suggestion that shares from SOEs could be sold to the public.
Capital Markets Taskforce chairman Rob Cameron says this would provide good investment options for New Zealanders, who have not had good choices during the financial crisis.
Asset portfolio ripe for change - English
Responding to questions from the floor at a post-Budget lunch on Friday, Mr English described the Government's multi-billion-dollar asset portfolio as ripe for change and improvement.
Mr English he was sure there would be demand for a Kiwi investment model, as a means of raising capital, then went on to talk about the future of Kiwibank.
"One of the issues is we've got this big balance sheet, and we can't recycle any capital on it, which is a bit odd, particularly in a capital constrained world.
"There's no-one else operating to that self-imposed constraint and there are businesses there that are failing, which we are no good at managing," he told the Christchurch audience.
The Labour Party says any partial asset sales by the Government would be a step on the road to full privatisation.
Leader Phil Goff says when Air New Zealand and the railways were privatised by the National Party, they were asset-stripped and run into the ground and that would happen again.