KEY POINTS:
Prime Minister John Key has raised the prospect of large-scale corporate bailouts, but he is refusing to say who the potential candidates are.
Treasury had done "scoping" work on potential bailout candidates, but such a move was the Government's least preferred option for dealing with the economic crisis, Mr Key said today.
His comments come as the British government looks poised to inject another $555 million into its struggling banking system.
Asked what conditions would prompt a bailout here, Mr Key said: "If we got into a situation where a New Zealand corporate could not raise money in its own name, could not receive the level of funding that was required from the banks and we deemed it to be in the best interests of the country for the Government to step in and provide those funds on a temporary basis."
"There are a limited group of corporates which would sit within that quarter."
He refused to identify which companies they were.
But he said preliminary advice from Treasury on state of the lending market was that banks were still lending money, albeit more conservatively than last year, and the sector was operating more effectively than in either the United States or Britain.
H e said the parent companies of New Zealand's Australian-owned banks were still raising significant sums of money to lend and banks had a lot more room to raise money through local Reserve Bank initiatives.
He said the economic outlook had worsened since before Christmas but "I don't think we need to be constantly talking ourselves into a doom and gloom spiral".
Treasury's latest update, last week, forecast growth would come to a standstill this year and unemployment could almost double to about 7.5 per cent, by 2011.
Mr Key said he expected Reserve Bank Governor Alan Bollard would cut the official cash rate again at its next review next week and the Government was working on a range of relief measures.
He said the Government still had a strong underlying fiscal position compared with other countries.
Cabinet ministers were considering a range of initiatives for small and medium-sized businesses, which would be announced on February 4.
A list of infrastructure projects that would be brought forward was also being finalised and would be released next month.
Ministers were also working on who would attend the Government's February 27 jobs summit and the ideas that would be canvassed.
- NZPA
