Key doesn't toe the standard line on recession cure

Our Prime Minister has emerged as something of a cavalier with a unique approach to solving the current economic crisis, in an interview published in the Wall Street Journal on the weekend.

"We can use this time to transform the economy to make us stronger so that when the world starts growing again we can be running faster than other countries we compete with", John Key told the Journal's Mary Kissel in an interview conducted in his Beehive office.

That idea - growing a nation out of recession by improving productivity - puts Key and his National government at odds with "rescue" policies being carried out in Washington, Tokyo and Canberra.

Those capitals are rolling out billions of dollars in stimulus packages - with taxpayers' money - to try to prop up growth.

"That's risky," Key said. "You've saddled future generations with an enormous amount of debt that then they have to repay," he explains. "There is actually a limit to what governments can do."

The WSJ seemed bemused to have found a national leader who is talking about market-based approaches to the global recession. While other western economies have taken the safety-net-at-the-bottom-of-the-cliff approach, New Zealand's leader is decidedly gung-ho.

"We have been on a slippery slope," Key admitted the Journal, pointing to the country's slide to the bottom half of the Organisation for Economic Cooperation and Development's per-capita GDP rankings, in a jibe at the previous government's centre-left stance.

"... so we need to lift those per-capita wages, and the only way to really do that is through productivity growth driving efficiency in the country."

He talked at length about how to attract and retain talented workers. the WSJ reported.

For now, the prime minister is focusing on chipping away entrenched regulations that drive away foreign capital - a contrast to the US and Australia, which are reregulating their markets in the wake of the financial crisis.

"Good regulatory reform can be an important catalyst toward driving economic growth and coming out of the recession faster," Key said.

But ultimately, The PM said his biggest fear is rising inflation on the back of rising money supplies.

"Economic theory will tell you that inflation is going to rise - and that inflation will be exported around the world."

Key explained to the Journal that he understood how the US was constrained to use inflation as an interim tool to crank the economic engine up again.

"But longer term", warned Key, "inflation is cancerous to your economy."

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