1 Oct 2008

US bailout package must go ahead, says Cullen

6:43 pm on 1 October 2008

Finance Minister Michael Cullen says the Government's plans for strengthening the New Zealand economy would need to be revisited if there is a significant collapse in the American economy.

United States senators will vote on Wednesday on a revamped financial rescue package after the House of Representatives rejected an initial $US700 billion plan.

The plan, which would allow the Treasury to buy toxic mortgage-related assets from banks, has been the main hope for government action to unlock credit markets and head off a deeper economic downturn in the US and elsewhere.

Dr Cullen said on Wednesday it remains important that the stalled bailout package for troubled Wall Street banks eventually proceed because the financial crisis will otherwise feed into the real economy.

He says the Labour Party has a strategy for the long term, but those plans are built around the assumption that the US economy does not collapse.

He says if the US Congress does not agree on a bailout package, the next Government will have to think about short-term issues facing New Zealand, not just long-term growth.

Dr Cullen says New Zealand's financial sector remains very sound.