No crisis, says Key
The current global market shakes are not as bad as the crisis two years ago, says Prime Minister John Key.
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The current global market shakes are not as bad as the crisis two years ago, says Prime Minister John Key.
If the New Zealand authorities need to take action to avert a downturn there is sufficient capacity in both monetary and fiscal policy to do so, Mr Key told his post -Cabinet press conference this afternoon.
However his comments make it clear his preference is for monetary policy action, through the Reserve Bank, rather than running a looser fiscal policy by the government.
"I'm less pessimistic than I was in 2008," he said. If the economy were hit by the waves from global financial market turmoil over the past week, the Reserve Bank, with the official cash rate at 2.5%, is in a position to cut rates if it needed to, he said.
Most other OECD countries have their rate "at zero percent in real terms", he said.
The high New Zealand dollar would also fall if growth prospects fell, he said, which would provide some relief for exporters.
But both the global and local economies are in better shape than they were in 2008-09, he said. The government remains committed to returning the fiscal balance to surplus by 2015 - at the latest - and keeping debt below 30%.
Ratings agency Standard and Poor's had suggested some governments would need to run looser fiscal policies - that is, increase spending or cut taxes - to avert a downturn but Mr Key said New Zealand was not in that situation.
Rob Hosking
Mon, 08 Aug 2011
Mon, 08 Aug 2011
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No crisis, says Key
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