Key Points:

National insists it has a plan. Its critics say if there is one, then it's too little, too late. Political correspondent John Armstrong analyses the Government's handling of the deepening economic gloom.

Talk to John Key and Bill English and what strikes you immediately is just how relaxed they are. It is not a front. Power does that to people.

After the frustration and sterility of Opposition, there are suddenly buttons to push and levers to pull. People listen to you, rather than merely tolerate you. Officials come running. Things you want to happen actually do happen. It is very invigorating.

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You might have thought, however, that the prospect of governing through the worst economic downturn since the 1930s might have furrowed the brows of the Prime Minister and his Minister of Finance just a little.

And never more so than this week. Because this week the international economic meltdown finally hit home. And for the first time the National minority Government looked a bit wobbly on it.

The warning from Fisher & Paykel Appliances to the Stock Exchange that the company expected a slump in profits and needed a capital injection highlighted not only deteriorating domestic market conditions but also the acute vulnerability of New Zealand as an export-dependent nation.

Not only had the domestic whiteware market shrunk by 20 per cent between last October and this January but the company's sales revenue had fallen by a similar amount in its European and American markets.

Suddenly, the academic theorising about recession and what to do about it had a human face - Fisher & Paykel's 1600-strong local workforce.

The Prime Minister, who maintains close contact with the heads of major companies, was soon on the phone to John Bongard, Fisher & Paykel's chief executive. By the time of his late afternoon post-Cabinet press conference, Key was floating the possibility of the Government, as a last resort, stepping in to save an "iconic" New Zealand company.

This was uncharted territory. English had been saying the global economic meltdown had resulted in the unthinkable seeming to happen each week. Here was a National Party prime minister, of all people, suddenly touting the unthinkable. Was Key succumbing to the kind of populist urges which have seen him leapfrog across the centre divide of politics and out-Labour Labour - something he has become a past master at doing?

Or was he merely trying to ensure business confidence did not take another massive, perhaps terminal hit?

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Fisher & Paykel Appliances is actually deserving of the title of "iconic". Founded in the 1930s under the protection of high tariff walls, the company survived the economic restructuring of the 1980s and 1990s through huge investment in technological innovation. It has opened manufacturing plants in Asia, Europe and America.

It has been the success story on which successive governments have modelled their economic development policies, one only blotted public relations-wise by moving some manufacturing offshore to cheaper labour countries like Mexico and Thailand. Nevertheless, as Jim Anderton summed it up, Fisher & Paykel is New Zealand's General Motors.

The symbolism is unavoidable. If Fisher & Paykel Appliances were to fail, it would be a massive psychological blow to the country's self-confidence at the worst possible time.

Key's talk of intervention was very deliberate. In his view, these are extraordinary times demanding extraordinary solutions. Faced with the potential loss of 1600 jobs, the choice was either to do something or do nothing. That is not really a choice.

English, however, played a dead bat to Key's talk of potential bail-outs of struggling corporates. English did not shoot down the idea, but he did not express any enthusiasm for the concept either.

He and Key were predictably peppered with parliamentary questions from Labour seeking the criteria under which struggling companies would qualify for bail-outs.

They were further questions outside Parliament. Why should the New Zealand taxpayer fork out cash to save jobs in Thailand? Why should the taxpayer come to the rescue of the company's shareholders? Fisher & Paykel Appliances may be an iconic asset, but it is not a strategic asset like Air New Zealand, whose absence would definitely hurt the economy.

The Government may have got away with it this time. Key's talk of bail-outs even as a backstop would have offered comfort to a jittery public, while English's dismissive tone would have reassured the narrower audience of the business and investment sector.

But a government can mix its messages for only so long. And fiscal stringencies mean the decisions it is going to have to make are going to get tougher. Iconic or not, there is going to be little room for sentimentality.

This messy episode has highlighted the need for the Government to lift its game communications-wise as the recession worsens. Part of the problem has been one of a new government bedding itself in. That takes time. But as things get tougher in coming months, the Government is going to have to be more assertive in hammering home its messages to nervous voters. It has not been doing that largely because its political honeymoon has meant it has not had to do so.

It also has to find a way of reconciling Key's enthusiasm with English's caution. This week has underlined the necessity for the Prime Minister and the Minister of Finance not only to be singing from the same song sheet but in harmony as well.

English is writing a Budget under extremely trying fiscal circumstances. His priorities revolve around debt ratios, Budget deficits and credit rating agencies. He warns that while the Government can take the "rough edges" off the recession, it cannot do much more than that. And it certainly cannot roll back the expected wave of unemployment. His warnings are becoming louder and more frequent as revenue forecasts get even worse.

Key's priorities stretch wider. He thinks people are realistic about the limits on the Government's capacity to help. But he knows the quid pro quo is that the public expects the Government to explore all options to save jobs before finally saying it cannot help.

That is Key's inclination anyway. Something of a lateral thinker, he is not hidebound by ideology. He is more interested in finding solutions that work and is not fussed where they are sourced from. He would not see the state taking a shareholding in a major corporate as quasi-nationalisation and a dangerous precedent for a centre-right government.

It is all about retaining flexibility. And the Prime Minister is loath to lose that over coming months. He has precious little room to move as it is.

He also knows National will be judged at the ballot box by its performance in getting the country out of recession once the full impact of the global downturn has washed over New Zealand. That hinges largely on the effectiveness of tax cuts, spending on infrastructure-building projects and the Reserve Bank's slashing of interest rates to stimulate the economy and thus soften contractionary forces largely coming from overseas.

There has been much argument with Labour over the correct size of the "fiscal stimulus" and the timing of such pump-priming. That may generate excitement within the Wellington Beltway. It is hardly the stuff to get the wider electorate's mojo working.

However, the Government has been conscious that it cannot be seen to be sitting on its hands until the international "tsunami" - as English has apparently been calling it - strikes.

In the interim, the Government has run a containment strategy to mute critics through staggering announcements.

This approach saw economic portfolio ministers hold a high-profile meeting in mid-January, followed by a major speech on the economy from Key and the release of a tax relief package for small and medium-sized enterprises which was followed by last week's list of infrastructure projects on which work can begin fairly quickly - which will be followed by next week's jobs summit.

It is all designed to ensure the Government maintains momentum on this most critical issue, rather than allowing weeks to pass without anything seeming to be happening, risking the impression of drifting.

This approach had the disadvantage of looking piecemeal and the Opposition has claimed there is no coherent plan. That would have been avoided with a mini-Budget or big-bang announcement of the kind favoured by Australian premier Kevin Rudd.

With large sums set aside for the fiscal stimulus, however, National simply does not have the cash for policy packages of the Rudd kind. As it is, the Government needs to have something flash up its sleeve for the Budget in May. Again, it comes back to flexibility. If the Government has occasionally looked at times like it has no plan, it is because it wants to keep its options open.

If Key and English manage to steer the country through this crisis relatively unscathed, they are guaranteed a place in history not far below the lofty heights attained by Michael Joseph Savage and Walter Nash, their respective counterparts in the first Labour Government, who yanked New Zealand out of the latter part of the Great Depression in the 1930s.

However, if they get it wrong, the pair will be pigeonholed alongside George Forbes and Gordon Coates, National Party equivalents who ruled under the Reform banner prior to Labour's victory in 1935 and who, like Key and English, had the profound bad luck to be in Government as things began to get really nasty.

And that is exactly what is starting to happen in the here and now.