Key confident the Government can afford SCF payout

Allan Hubbard didn't like awkward questions. Photo / Supplied

Opinion

Prime Minister John Key remains confident the Government will recover much of the $1.7 billion in taxpayer money paid out when South Canterbury Finance was put into receivership.

Last week, the Government paid out $1.6b to South Canterbury's investors under the retail deposit guarantee scheme and gave a loan to the receivers.

The Government has said it expects to recover about $1b of that.

Today Mr Key said $1.7b was a "deceiving number".

Treasury estimated the total cost at $800m and the revenue earned by the scheme also had to be taken into account, he told TVNZ's Q&A.

Reserve Bank Governor Alan Bollard said the retail deposit guarantee scheme was necessary.

"In a nasty crisis of that sort, you haven't got much room to move and when you do move you have to move very quickly and so, looking back, I don't think we could really have done anything differently."

He said he was reluctant to establish the scheme but not doing so would be worse than the distortions and adverse incentives such a scheme creates.

New Zealand had to do something when Australia announced it was putting in place a guarantee, he said.

"But we did stop a bank crisis and we did stop a financial sector crisis, so ultimately that was a successful scheme."

- NZPA