As economists slash their first-quarter growth forecasts, some suggest the Reserve Bank could cut its official cash rate by as early as next month to stave off the effects on the economy of drought and the coronavirus outbreak.
Others suggest bigger guns in the form of fiscal stimulus will be necessary to keep the economy afloat as the outbreak spreads around the world at an alarming rate.
Both Westpac and ANZ have raised the possibility the central bank may soon cut the official cash rate (OCR) at its next opportunity on March 25, but NZIER principal economist Christina Leung says there's only so much monetary policy can do.
Now, she says, it's the Government's turn.
"We recognise the risks of an OCR cut, but we do see it as more appropriate for the Government to respond by injecting stimulus, should the situation get worse for the New Zealand economy," she told the Herald.
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A cut in the OCR was likely to mean a weaker New Zealand dollar, which would help the economy.
But she said still lower interest rates would increase financial instability by increasing already high household debt.
"The Government has more room to provide stimulus since the OCR is already close to zero anyway," she said.
Latest Crown accounts show the Government is sitting on a $7.5 billion surplus, with the lowest debt levels in almost a decade.
Going on comments this week from Finance Minister Grant Robertson, the Government already appears to be going down that fiscal stimulus path.
Robertson, speaking to reporters after addressing the Auckland Chamber of Commerce in Auckland this week, said the Ministry of Business, Innovation and Employment was assessing three scenarios.
Scenario one predicts a temporary global demand shock where there's a temporary but significant impact on the New Zealand economy across the first half of 2020, before growth rebounds in the second half as exports return to normal.
The second scenario is based on a longer-lasting shock to the domestic economy, as the global impact feeds through for a period of time, and where there are cases of coronavirus in New Zealand.
And the third scenario is planning for how to respond to a global economic downturn if the worst case plays out around the world, and there's a global pandemic.
"The further the virus spreads and the longer it lasts the more we move to scenario two where we will see an impact right across 2020," he said.
Asked if the Government was considering adding extra stimulus Robertson said: "We're assessing that at the moment. Obviously this is the time that we are putting the Budget together so it's a difficult job to do with so much uncertainty around. But clearly that's something that we are thinking about.
"Bear in mind we have an expansionary fiscal policy, and we had the big infrastructure investment policy that we announced recently, that will provide ongoing stimulus into the economy. But clearly we have to look at a longer-lasting outbreak and the fiscal response. And the Budget will be a time to talk about that."
The question of whether monetary policy can help economies cope with the rapid spread of coronavirus is being asked worldwide.
Traders have this week raised expectations for rate cuts from the US Federal Reserve and other big central banks, wagering that they will repeat the response to market turbulence that has become familiar since the financial crisis.
Markets are now pricing in more than two cuts by the Federal Reserve over the coming 12 months, implying a reduction of at least half a percentage point from the current level of 1.5 to 1.75 per cent.
In his speech to the Auckland Chamber of Commerce this week, Robertson warned that New Zealand would experience a "short, sharp" economic hit.
"We meet today in the shadow of one of the biggest uncertainties that the global economy has seen in recent times," he said.
He warned that the outbreak would have a "serious impact on the New Zealand economy in the short term".
ANZ chief economist Sharon Zollner said the impacts of the coronavirus outbreak were likely to be complicated, and more like a war.
"This is a very complex shock, more like a war than a traditional economic slowdown, in that it includes massive disruption to the supply side of the economy, as well as to demand.
"It is impossible to forecast its impacts accurately. But it's very clear they aren't going to be anything good. And it's increasingly clear that they aren't going to be brief."
She agreed fiscal policy was well placed to respond in a targeted fashion to support businesses.
In the meantime, the market is pricing in a cut in the OCR by August, with the chance of more.
"With uncertainty high, the RBNZ - and we - have a bit of time to see how things pan out," Zollner said.
"But frankly, probably not much."