19 Aug 2009

Government poised to extend bank guarantee scheme

10:02 pm on 19 August 2009

The New Zealand Government is poised to extend the bank guarantee scheme by another year to bring it into line with Australia.

Prime Minister John Key is in Australia for a five-day visit and told a business audience in Melbourne on Wednesday the matter is being considered by the Cabinet.

Mr Key says the guarantee runs out in October next year, but Australia's scheme goes until 2011.

Radio New Zealand's political editor reports Mr Key would not confirm that an extension is likely, but questioned why New Zealand would end its scheme before Australia.

Mr Key is due to meet Australian Prime Minister Kevin Rudd in Canberra on Thursday and says he will check to ensure that Australia is not intending to bring its scheme to an end earlier.

Under questioning, Mr Key said he was not worried by the fact 80% of New Zealand's banks were Australian-owned.

However, he said he is worried by the level of New Zealand's foreign indebtedness.

Single market advocated

The Prime Minister told business leaders bringing the economies of New Zealand and Australian closer will help produce more Australasian companies.

Mr Key said he wants to take the idea of a single economic market to a new level.

He believes a robust, single economic market is a cornerstone of the two countries' relationship and a strong, well functioning trans-Tasman market would help cushion both from the impact of the global recession.

However, he said more needs to be done to bring the economies closer.

Radio New Zealand's political editor reports Mr Key and Mr Rudd are expected to announce changes to make trans-Tasman travel easier.

The leaders will also discuss regional and international issues, as well as other initiatives aimed at bringing the two economies closer.

On Friday, Mr Key goes to Sydney, where he and seven other New Zealand ministers will meet Mr Rudd and Australian ministers in what has been dubbed an Australasian Cabinet meeting.