KEY POINTS:
If Bill English is a deeply worried man it doesn't show.
If he is disappointed or frustrated to resume the Finance Minister role after nine long years out of office only to inherit the worst economic crisis for a generation, that is not apparent either.
Instead what comes across is a determination to press ahead with an agenda not thwarted, but rather made more urgent, by the grim times.
"It is going to be a tough year."
With an unremitting flow of bad international news the Treasury says the outlook is now close to the alternative weaker scenario than the central forecast in the December economic and fiscal update it delivered just a month ago - if not worse.
That means an economy that shrinks further, or at best goes sideways, this year.
It means the unemployment rate climbing, maybe above 7 per cent (it is 4.3 per cent now) and a steep rise in Government debt, from around $30 billion now to $80 billion by 2013.
"The single biggest uncertainty at the moment is China. If China's growth slows right down it has a big impact on Australia, which has a big impact on us, as well as the direct impact on us," he says.
"The Australians are unsure but increasingly negative about China's prospects, from my discussions with them."
The Government's top priority is recovery, English says. The second is getting the Crown's books back in order.
A significant fiscal stimulus is already under way, he says. "In fact the sharply rising debt shows just how much the Government is going to be borrowing to inject into the economy."
By the Treasury's reckoning, the stimulus is the fifth largest, relative to the size of the economy, among developed countries. Over the two years to June 2010 the cumulative boost would amount to about 5 per cent of GDP.
Most of that was set in train by the previous Government - a hefty increase in spending in the last Budget and the October tax cuts.
But there are also National's tax cuts to come in April as well as accelerated infrastructure spending and the relief package, through Working for Families and the accommodation supplement, for people who lose their jobs.
In addition the Reserve Bank has slashed interest rates and oil prices have fallen sharply.
"The combination of those things explains why many households haven't felt the sharp edge of recession."
The next phase of the Government's response to the crisis will be measures aimed at building confidence in the small and medium enterprise sector, he says. Prime Minister John Key will announce them on February 4.
"There will be a number of compliance and tax-related issues," English says. "But it is not going to be expensive."
That suggests the tax changes will relate more to helping cashflows than reducing businesses' final tax burdens, but mindful perhaps of not stealing the PM's thunder English is not giving anything away.
"Look, it will helpful for businesses. There's an urgency about the micro-economic changes needed to raise business confidence and therefore investment, so that we can recover from this recession and lift our longer-term growth prospects."
Things like reforming the Resource Management Act?
"Yeah. But with those longer-term issues there isn't one big thing that changes it. The challenge is to get through a very long agenda of clearing out the mismanagement and misdirected policy of the last nine years, so that business will be able to get on and replace the jobs that are lost and lift our business investment rate."
The Government is open-minded about what that will require, English says.
The jobs summit next month will be an opportunity for input to the process, but not an open invitation for special pleading, where interest groups peddle plans to make their commercial lives easier at the taxpayer's expense.
"I think it will be better than that. The people we are talking to are realistic about where New Zealand is and keen to be involved in practical decision-making. Anyone who comes along to that summit knows that if they have got some pie-in-the-sky scheme designed to put millions in their pocket, it is going to go nowhere."
An obvious channel for a Government response to the implosion of demand in the economy is infrastructure spending.
The Government has allocated just under $5 billion for capital spending over the next three years.
But it is often seen as taking too long to provide much of a fillip in the short term.
"We are looking to find smaller-scale infrastructure that we can bring forward this financial year. But half the job is trying to clear out all the blockages from the decision-making process. Larger ones take
longer to get up and running, but we currently have a set of processes that are just unreasonably long."
Meanwhile the drying up of residential construction in the private sector implies an emerging glut of tradesmen and scope to put them to work upgrading the state housing stock, classrooms and the like.
"We are looking at those options."
The third element of the Government's line on its response to the crisis is to sound a note of fiscal caution. While it is appropriate to leverage off the Crown's strong balance sheet to "take the sharp edges" off the recession, it has to be mindful of the future costs of piling up debt.
That point was hammered home last week when Standard & Poor's put the Government on notice of a potential downgrade to the sovereign credit rating.
So while the first order of business is to avert a vicious circle of shrinking demand, mounting job losses and deepening pessimism, beyond that the Finance Minister has to get his grappling hook into the steeply rising projected Government debt track and haul it down.
"Every dollar we spend stimulating the economy now has to be repaid later, with interest," he says.
"We are looking at a three- to five-year process to get the Government finances back on a sound footing.
"Government was going to need an overhaul anyway after nine years of complacency but this Standard and Poor's signal - and more importantly the reality of the numbers - mean it is quite urgent."
The public service needs to get used to the idea that there will be budgetary restraint not just this year but for three to five years.
"They have to be thinking about different ways of delivering services when there isn't much more money. There will some [more] but not much."
But he shrugs off the suggestion Standard and Poor's will help him to rein in some of his colleagues' spending plans. "Look, it's just a warning. I'm fortunate to have a Cabinet that hasn't known good times and is showing a sense of responsibility and patience."
The Government is keeping a close eye on the banks, he says.
Now that it is offering guarantees for their future wholesale finding - a contingent liability which conceivably could reach $150 billion - it wants to make sure that has the desired effect, which is to maintain an adequate supply of credit into the economy.
English is not too concerned at this point that the banks are facing a funding squeeze. They have used the Reserve Bank's facility under which it lends against mortgage-backed securities more than expected and the Government's wholesale funding guarantee less than expected.
"The fact is that over the next couple of years as savings rates rise the banks are likely to be relatively well funded," he says. "Which is not to say there aren't businesses and individuals who feel hard done by when they go to their bank. The anecdotal evidence is that the banks are tightening up on anything they regard as vaguely risky."
But that is what you would expect in times like these.
English believes the recession's effects will be felt for many years after it has ended. "We are not going back to the fairyland of the last 10 years. Households are going to be less willing to take on debt and the financial system will be less willing to give it to them Savings rates are going to rise.
"I think there is going to be consistent demand for policy that builds business confidence and investment, because we are going to have a dose of unemployment that we haven't had for quite a while."
There will be a global debate about housing bubbles, monetary policy and financial regulation. And Governments will still be living with the debts they are running up now in 10 and 15 years.
The enormous wealth destruction which has occurred will cast a long shadow, especially on the babyboomers - many of whom will find their asset base has been cut in half, while they have 20 years of retirement ahead of them.
"We are starting to pick up anecdotal evidence of people preparing to stay longer in the workforce. But that will depend on the availability of jobs which, at least in shorter term, is going to get worse."
And what about Generation Y, who has never never anything but easy credit and a tight labour market?
"They will adapt. New Zealanders are resilient. They don't get paralysed by an economic downturn or economic uncertainty the way thy used to. They will roll up their sleeves ... and do what they have to."
