KEY POINTS:
Finance Minister Michael Cullen says it is crucial United States lawmakers agree on a package to bail out the faltering financial sector, as the crisis risks spilling over into a serious economic problem.
The shock failure to pass a US$700 billion ($1 trillion) bank rescue plan yesterday sent
world stock markets plunging and New Zealand's was not immune.
Dr Cullen said that if the US lawmakers managed to put together another package the markets would bounce back again - but if they didn't then there would be further deterioration.
"It is crucial that a package is done, and I'm very confident they will get there," Dr Cullen said.
"As long as they don't get themselves stuck in a kind of blaming process."
The US lawmakers failed to pass a rescue package with dissenters on both the Republican and Democrat sides of the House voting against it.
Politicians in New Zealand are watching events closely and are acutely aware that the longer it takes to get a bailout package together, the higher the risk that this country's economy will suffer.
Dr Cullen said that while the problem could earlier be deemed a financial crisis rather than an economic one, it was getting beyond that now.
"It is, because it's so large, because basically we've seen a major loss of confidence in the financial sector," he said. "What that is going to do is to dry up credit or make it impossibly expensive to obtain."
That would flow through to the real economy, and affect businesses seeking capital for investment and so on, he said.
"At the moment we're not seeing major liquidity issues in the local market, the system remains sound," he said. "If it's clear that the package has failed, [and] there is going to be no package, then at that stage I think Treasury and the Reserve Bank are going to have to sit down and analyse what the options are from there."
That would likely be done in conjunction with Australian counterparts because the two countries' financial sectors were so intertwined.
The global financial crisis comes just weeks out from the election and National was yesterday seeking to cast doubt on Dr Cullen's credentials to steer the country through the challenge.
"The important thing is for New Zealand to have a well-structured economic plan for growth," National leader John Key said.
"National's economic package was carefully put together with a firm eye on the evolving international uncertainty."
National is set to unveil major planks of its economic plan within the next fortnight, including its tax cut plan and details of how it will fund it.
"We are increasingly concerned that Labour has no real plan - if Helen Clark has one, she has certainly not been telling anyone about it," Mr Key said.
He said the international situation was "serious" but he was hopeful the US lawmakers would be able to reach an agreement over the next 24 hours.
