Finance Minister Michael Cullen says there is no evidence of any risk to New Zealand's banking institutions - nor is any anticipated.
The New Zealand Government on Sunday moved to guarantee all bank deposits for two years, for banks which opt into the scheme.
Dr Cullen says he acted following public concern about the stability of the country's banking sector.
He says New Zealand was in the uncomfortable position of being the only Western country not offering any guarantee on deposits.
Australia has guaranteed deposits in banks, building societies and finance companies for the next three years.
If all banks take up the scheme, Dr Cullen said it will leave the Government with a contingent liability of about $150 billion.
The National Party welcomed the announcement, saying it expects the Government to set up a bipartisan process to work through the details.
Finance spokesperson Bill English told Morning Report that now is not the time for either major party to play politics with the issue.
But he said National was not consulted about the Government's move and he would expect to be involved in any further policy discussions on responses to the international financial crisis.
The New Zealand Stock Exchange says events overseas have forced the Government to announce it will guarantee financial deposits.
Chief executive Mark Weldon says it would dent public confidence in this country's banking system if it was not covered by an insurance scheme.
He says customers are likely to leave banks that don't take up the guarantee, in favour of those that do.
The guarantee would take the form of a bilateral contractural agreement between the Crown and the individual banking institutions which take up the guarantee.
Banks with deposits of more than $5 billion will be charged to have the guarantee.
A fee of 10 basis points per annum will be charged on total deposits above $5 billion.
This means that a bank with $20 billion in retail deposits would pay $15 million in fees per annum.
If all banks take it up, it will leave the Government with a contingent liability of about $150 billion.
Dr Cullen said the deposit guarantee will be introduced for a two year term in the first instance, which will give time to see how well international financial markets stabilise in the months ahead.