Prime Minister John Key has denied that the Solid Energy crisis and Telecom job cuts are a black mark against the Government's handling of the economy.

A Government bailout of state-owned enterprise Solid Energy appears likely as Mr Key today described the situation as "extremely serious" and one that the Government will have to get involved in.

But he distanced himself from news that Telecom will slash hundreds of jobs as it seeks to reduce costs across its business. "Telecom is going through it's own set of issues," he said.

A decision to cut jobs by the telecommunication giant's new chief executive was "not really an issue in any way related to the Government," Mr Key said.


But the Government will back Solid Energy, he confirmed.

He supported Finance Minister Bill English who yesterday would not rule out a Government bailout, saying it would not let the company fall into receivership.

The debt-ridden coal mining company has revealed being in talks with its banks and the Government over its future, after its debt rose to $389 million and a it would report a further "significant loss" in its half-year result.

"The situation is obviously extremely serious with Solid Energy," Mr Key said.

"Exactly what's required and what happens next is a matter we need to work our way through, but it's fair to say we're very concerned by what we see. The Government will have to get involved."

The threat of job losses and mine closures could not be ignored, Mr Key said, but he stressed that the Government was committed to the mining sector.

"Solid Energy, in its past, has been a very good company and has got some very valuable assets as part of its portfolio, and that's the reason why we're working alongside the company," he said.

"Let's see what happens next, but there's a process to go through."

Solid Energy's woes were not indicative of troubles in other SOEs, Mr Key said.

Its problems were "quite unique", given they were impacted by a collapse in coal prices, along with a number of investments that haven't paid off.

Asked if former chief executive Don Elder is at fault for the problems, Mr Key said there was little to be gained from finger-pointing.

"There'll be plenty of forensic work that will be done over the next few months as we look at what went wrong at Solid Energy, who's to blame and why.'"

Whether Mr Elder should have received a golden handshake, or how much he received, was a matter for the board of directors, Mr Key said, while also saying he couldn't yet answer how much a potential bailout would be.

He also said the double-blow of Solid Energy and Telecom wasn't indicative of an ailing economy. New Zealand's labour market was "very flexible", with around 100,000 jobs lost and another 100,000 jobs created in any three-month period, he said.

All of the economic indicators look positive, Mr Key claimed, with confidence being restored, and now comparing favourably with other similar countries.

"Our job can only be, as the Government, to try and lay out a platform which encourages employers and businesses to both establish and to employ people. And if you look at our record, that's what is happening."