Liam Dann, Business Editor at Large for New Zealand’s Herald, works as a writer, columnist, radio commentator and as a presenter and producer of videos and podcasts.
If economic conditions continue to deteriorate the Reserve Bank doesn't plan to cut interest rates further - which would require heading to zero, or into negative territory.
Instead it has flagged plans to launch a GFC-style asset buying programme that would be unprecedented in this country.
Officially called Quantitative Easing(QE) the process is also sometimes dubbed "money printing" because it can effectively release large amounts of cash into the economy.
On Sunday night the US Federal Reserve launched new programme worth more than NZ$1 trillion.
The Reserve Bank of Australia has also today announced it will launch a QE programme - the nation's first.
The Reserve Bank monetary policy committee today made a triple cut to the official cash rate- taking it to a record low of 0.25 per cent and committed to keep it there for 12 months.
But tools to implement a zero cash rate or negative rates are not in place and the committee decided the next step would be: "Large Scale Asset Purchases of New Zealand government bonds.... to provide further monetary stimulus."
"It means we can use our money," said Reserve Bank Governor Adrian Orr, talking to the Herald after the morning's announcement.
"We can give our cash to a third party for their asset. They've got now cash, we've got the asset on the balance sheet."
Those assets in the foreseeable future, would be government bonds - although there are other assets that can be bought if more unconventional QE is required.
The key point is that the third party now has cash to be spending.
Orr says he doesn't buy the "money printing" analogy, primarily because the assets the Reserve Bank buys will stay on the balance sheet.
Printing money seemed to mean different things to different people but would be the equivalent of "handing out IOUs" with nothing behind them, he said.
But it "was just another way of getting cash into the economy, using different tool."
With government bonds, the Crown would continue to issue debt as usual but the Reserve Bank would buy in the secondary market.
That meant "those banks which are holding bonds know there is always a buyer in the market at a certain price," Orr said.
"The fact that we are there, buying those will keep the interest rate down."
New Zealand never had to resort to QE during the 2008 crisis but at that time the Reserve Bank had head room to cut the official cash rate far more deeply - from 8.25 per cent (in June 2008) to just 2.5 per cent in April 2009.
Orr said comparisons with the GFC were only useful as comparisons for a sense of scale.
The current situation was "uncertain and unprecedented" he said.
"The GFC always gets used, at best it's some sense of a scaler. But its got nothing to do with the economics of what's happening at the moment."
Unlike the GFC we had a financial system and financial institutions which were sound and healthy, Orr said.
"They were totally taken out of the picture during the GFC."
We also had a Government with strong set of books and plenty of room for extra investment spending.
"Given that the plumbing still works very well, we can deploy a lot of that very quickly," he said.
While the very real health crisis made this something more than the GFC on one level, on another there was a more finite aspect to it.
Stock trader Thomas Lee works at the New York Stock Exchange. Photo / AP
"With the GFC there was some worry about: will the institutions ever come back to the way they used to be? Has capitalism failed completely?"
"Here we're watching this Covid-19 outbreak and we are quite orderly about adjusting for it," he said.
"So we are in a much more controlled position around the likely outcome…so if we take our time and be sensible, we can manage and mitigate the challenge.
"Courageous calls are being made globally we're not alone with them," he said.
It was a trade-off about near term losses as opposed to potentially much larger, more significant losses if radical action was not taken.
One challenge for officials and authorities was that the alternative responses would never be observed.
"But when you think about those alternatives, you think of things like the Spanish flu outbreak in 1918 when people didn't know much about it. Well we saw the outcome there."
