The Mixed Ownership Model Bill passed its first reading 61 to 60 after a fiery debate led off by State Services Minister Tony Ryall.
"This legislation and debate is about debt. It is not about the Treaty of Waitangi. It is not about foreign ownership. It is not about other considerations. It is about controlling our nation's debt," Mr Ryall said.
The Government hopes to raise up to $7 billion by selling off shares in four energy companies and Air New Zealand, beginning with Mighty River in the second half of next year.
Mr Ryall said his Government's asset-sales plan was part of its wider economic plan, which was also about increasing savings, "and getting our country through the worst financial crisis ... in 100 years".
But Labour's deputy leader, Grant Robertson, slated the legislation as "a sugar hit ... a desperate, flailing attempt by a Government bereft of ideas on how to grow the economy".
He dismissed Mr Ryall's contention the sell-off was needed to pay for new hospitals and schools.
"They are a core part of a Government's business. It is an insult to this House and to New Zealanders to try to say to them the only way you'll get those schools and hospitals is if we hock off the assets."
Green Party co-leader Russel Norman said the plan was unjust because it took assets owned by all New Zealanders and put them in the hands of the wealthiest.
He said New Zealand's debt problems were primarily due to private-sector debt.
But although the Government's finances had worsened in recent years, much of that was down to National's first-term tax cuts, which gave $2 billion a year to the top 10% of income earners, Mr Norman said.
Mana Party leader Hone Harawira read out his "Open Letter to Overseas Investors", which he sent to major overseas newspapers.
In the letter he warns potential investors of ongoing High Court and Waitangi Tribunal action challenging the asset-sales programme.
The Bill passed with United Future and Act's two votes, with National's other coalition partner, the Maori Party, against it.
The Bill enables the Government to free Genesis Power, Meridian Energy and Mighty River Power and Solid Energy from the ownership and oversight restrictions of the State Owned Enterprises Act.
However, in a partial victory for the Maori Party, the legislation picks up the SOE Act's Treaty of Waitangi provisions protecting Maori interests.
