KEY POINTS:
Finance Minister Bill English said today that each country has to make judgements about its own circumstances and how best to deal with them as they work out how to deal with the world financial crisis.
A raft of countries have now announced measures to sort out financial
institutions ravaged by the international credit crunch, as well as economic stimulus packages to deal with the fallout into the real economy.
The British Government yesterday announced a 20 billion pounds ($57 billion) package, or spending increases of more than 1 per cent of gross domestic product, funded mainly through borrowing.
The United State President-elect Barack Obama is also promising a package to create millions of jobs, while the current US administration continues to pour hundreds of billions of dollars into bailing out its generally foundering financial sector.
The Government is due to announce a stimulus package next month but the essential difference between New Zealand and countries such as the United States was the "extreme volatility" in their financial systems, Mr English said.
"They have to deal with that in the best way they can, whereas our financial sector has been relatively stable and our focus has been more on the real economy."
While the international rescue packages looked huge in comparison to the one that would be offered in New Zealand, Mr English argued that proportionately they were comparable.
On the campaign trail, National outlined introducing tax cuts in April on top of the October tranche, bringing forward infrastructure spending and helping those hit by redundancies.
"The package we are working is a similar kind of stimulus package. Over two years there will be a fiscal impulse of 4 per cent of GDP which is comparable to other countries."
With GDP of about $179 billion that equates about to $7 billion. The Treasury estimated in the pre-election opening of the books last month that the fiscal boost in the year to June 2009 would amount to 2.8 per cent of GDP.
On top of that the incoming Government has pledged another round of tax cuts in April next year and a boost to the accommodation supplement and Working for Families for those made redundant.
New Zealand's high interest rates also means the Reserve Bank has more room to cut rates than other central banks with lower rates, and this would help stimulate household spending as mortgage rates come down, Mr English said.
Many economists think the world and New Zealand economy could be in recession for a year or more, but Mr English said he did not accept the assertion that the incoming Government appeared to lack the sense of urgency that was being shown by other administrations.
He argued that the first and most important step had been putting in place the government guarantee of retail and wholesale deposits.
The advice from officials was that the retail guarantee was working as desired, but it was still early days for the wholesale banking guarantee.
"This seems much less dramatic than the measures needed to be taken elsewhere. What matters is whether it is effective and it seems to be," he said.
National had also pledged to further tax cuts and announced other measures during the campaign.
"Our plan was ahead of many other countries... but the political drama in New Zealand recently has been about a change of government, not the economy."
Mr English said the Government would be putting a heavy emphasis on the economy and expected the public to start paying more attention to it.
"A 4 per cent fiscal impulse emphasis shows we are taking it seriously. now that, I stress, is a Treasury estimate, but it is still significant."
Details of how the package would be presented and whether it coincided with Treasury's update of the economic and fiscal forecasts were still to be decided, but it would not be a mini-budget.
Parliament resumes on December 8 and the package is expected to be announced within a fortnight of that taking place.
- NZPA
* An earlier version of this story incorrectly stated that the National government's December announcement would inject $7bn into the NZ economy.
