KEY POINTS:
While I was in Lima a man observed to me "When a fire is raging nobody questions the price of water - they just put the fire out".
That's how an American investment banker (who else?) explained to me just why the US federal Government is pumping mega-billions into bailing out its financial sector and propping up its domestic economy to avert the punishing lack of confidence that could otherwise see a major global recession morph into outright depression.
The investment banker's conviction was admirable (or downright scary), but typical of the emerging mindset in both Western and Asian nations which advocates Governments should throw the "entire kitchen sink" at the financial crisis and worry about the consequences later.
It is the type of analysis that Prime Minister John Key would have been exposed to - many times over - during his quickfire trip to the Apec leaders' meeting in Peru and in his subsequent conversation with British Prime Minister Gordon Brown in London.
Many nations such as the US, Britain, various European countries and Asian countries like South Korea and Japan and Australia are now making their second round of major fiscal injections to keep their financial sectors moving and to put more cash into their consumers' pockets.
During the election campaign Key clung to the notion that National's "well-structured economic plan" would ensure the New Zealand economy is hermetically sealed from the global shocks.
But he should now be assessing whether National's impending tax cuts package, infrastructure spending proposals and mechanisms to help newly redundant workers will be enough to stave off the worst effects of the crisis here and pave the way for New Zealand to move out of recession by 2010.
Finance Minister Bill English now admits National's election package will not provide enough stimulation to do the job. English's relative pessimism no doubt stems from the Treasury's latest informal forecasts, which now predict the recession will last for all of next year, with resultant decreases in tax revenues, bigger welfare costs, and a larger debt blowout than was forecast before the election.
But neither Key nor English should be allowed to get away scot-free for their failure to inject this reality check during the campaign itself.
It remains one of the major failures of New Zealand journalism that Key - and also Helen Clark - were able to gloss over the likely extent of the crisis during their television debates and other interviews.
It should have been abundantly clear to any economically literate journalist who had done even a modicum of international research that the incoming Prime Minister would be faced with substantially worsened projections than were contained in the Treasury's pre-election forecasts.
But instead of doing the hard yards, exposing the real deterioration in the economic performance of our international trading partners, and seriously challenging the politicians - the TV hosts (in particular) plied them with far too many irrelevant questions.
Key must now decide whether to inject a reality check when he returns to Wellington on Monday, or, try and continue on in Pollyanna mode.
Frankly, the latter option is a no go. New Zealand's position is not directly analogous to that of our major partners...
This country's recession predates the fallout from the sub-prime mortgage crisis. A combination of usurious interest rates, highly-inflated food prices, drought and punishing oil prices tipped New Zealand over the line at the beginning of this year.
But New Zealand can no longer rely on the cushion provided by the "white gold" or dairy boom. International commodity prices are in a tailspin as demand slows, particularly in China. Fonterra has reduced its forecast payouts to farmers as demand slows and unsold product stockpiles on global markets. It is a moot point whether Kiwi dairy farmers should expect to receive such outlandishly high prices for their commodities in future.
All this points to the need for Key and English to face up to some hard thinking at next week's Cabinet meeting. They have difficult choices to make: Whether to proceed with their election package and acknowledge Government debt will blow out higher than their pre-election forecasts, or whether they should throw more dollars into the pump-priming effort and try to come out of recession faster.
My investment banker friend would say there is only one choice. But what happens if the extra water doesn't put out the fire and new infernos start? Will we be delaying the inevitable if New Zealand goes into more and more debt and the international recession lingers longer than politicians hope?
Sometimes a fire is in fact the answer.
Fran O'Sullivan received assistance from the Pacific Economic Cooperation Council to travel to Apec.
