Key welcomes US rescue package

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Prime Minister John Key has welcomed a $1.5 trillion United States rescue package.

The Federal Reserve announced it would use up to $800 billion ($NZ1.5 trillion) to buy mortgage-related debt and consumer debt securities.

"The US market's very important to give confidence to all the other markets around the world and in that sense I guess we welcome the fact that they've taken greater steps to try and shore up their economy," Mr Key told Radio New Zealand this morning.

The US rescue package announcement was overshadowed by figures out today showing the country's economy contracted at its fastest pace in seven years in the third quarter as consumer spending plunged to a 28-year low.

Separate reports showed US home prices continued their downward spiral, with the cost of single-family homes plunging to a record trough in September.

Mr Key said the Bush administration and incoming Obama administration had shown they intended to get "on top of this crisis".

"There is probably no option to shore up the likes of Citibank, clearly they've got issues with their car manufacturing sector, and just putting some stimulus into their economy," Mr Key said.

"These are obviously massive numbers but they are not on their own."

Britain had proposed a STG20b ($NZ58b) pound tax cut package and China was proposing large numbers.

"You've got a situation here where if governments don't act over the next year or so the implications are pretty significant because there's obviously quite a lot of contraction happening in the private sector, as private sector investors and businesses feel less certainty than they probably ever have about their future," he said.

"It's a very important time," Mr Key said.

"I think from New Zealand's point of view we're in better shape than a lot of others."

He said the crown accounts were in good shape and net debt was almost zero.

"If you contrast that to the United Kingdom their gross debt position is going to blow out from about 37 percent of GDP to 57 percent.

"I feel pretty confident New Zealand will come through this and come through it well."

Mr Key is visiting Britain after attending an Apec summit in Peru.

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