New Zealand should be "very worried" about the stability of the country's financial system and active government support is required to save key regional industries, such as Solid Energy's Spring Creek coal mine, says a top strategist for Australasian broking house JB Were.

Bernard Doyle, head of strategy in New Zealand, also argues the RBNZ should intervene to drop the value of the kiwi dollar.

Prime Minister John Key dismissed concerns about an unstable financial system as "nonsense", but Doyle's comments come at a time of growing concern about the high value of the New Zealand dollar.

"The RBNZ is one of the few central banks running relatively orthodox monetary policy," said Doyle in a research note. It was a "rarity in the global economy," with positive interest rates and no policy to print money.


"Unfortunately, in a world where the major central banks are breaking all the rules, this is not an advantage," he said.

The government should also be willing to support key regional industries, in a move similar to its creation of the nine-day fortnight during the 2008 global financial crisis to assist Fisher & Paykel Appliances, now subject to a Chinese takeover bid, to survive.

"Spring Creek will be an important precedent," said Doyle. The mine was a major employer and contributor to the fabric of the West Coast economy, while volatile global coal prices make "long production decisions particularly difficult."

Key said the Cabinet expected a report on Spring Creek from the new Solid Energy chairman, Mark Ford, within a week.

Doyle's commentary comes one week ahead of the departure of Alan Bollard as governor of the RBNZ, to be replaced by former World Bank managing director Graeme Wheeler, and as opposition parties clamour increasingly for a change in monetary policy settings to ease the high kiwi dollar.

Doyle says the RBNZ has been "playing with a straight bat" on its inflation targeting while the US Federal Reserve prepares to print "an unlimited quantity of money", the Bank of England is "printing money and providing cheap loans", and the European Central Bank is "making cheap money available".

Meanwhile, Asian central banks appeared to be targeting relatively stable developed economies like New Zealand and Australia to diversify their foreign reserves holdings, pushing the kiwi dollar up.

Most controversial was the central bank of the financial secrecy and tax haven Switzerland, which had been managing its currency against a "hard ceiling" for the last year.


In New Zealand, current monetary policy settings were "importing other people's problems."

Doyle says the RBNZ should cut the benchmark official cash rate to below its current historic low point of 2.5 per cent, use new tools to lean against the potential for lower rates to create an unwanted housing boom, and put "soft caps" on the New Zealand dollar.

Doyle suggests the RBNZ should accumulate New Zealand dollars at various price points, from 82.5 US cents through to 90 cents, at a time when the local unit has been consistently trading in recent days above 82.5 cents, and stood at 82.80 cents late today.

Doyle said the combined effect of Norske Skog halving production at its Kawerau pulp and paper mill, the possible closure of Spring Creek and the threat to the Rio Tinto aluminium smelter were examples of an unstable post-global financial crisis world.

In this environment, some industries would be more reliant on government support than in the past.

While intervention "should feel unnatural to government...passive government in the post-GFC world is equally dangerous."

Doyle likened a deal for Spring Creek to the US government's temporary bail-out for the automobile industry in 2009.