Bailing out or lending to the corporate and banking sector remains an option during the economic downturn, but it is the Government's least preferred choice, says Prime Minister John Key.
The economy was top of the agenda when Cabinet met on Tuesday for the first time this year.
Mr Key says Treasury has given the Government some preliminary advice on the state of the banking system.
He says banks are still able to raise money and are continuing to lend, although they are taking a more conservative approach to new customers.
Some corporations may need assistance, he says.
Mr Key says he expects the Reserve Bank will drop interest rates next week.
Reserve Bank Governor Allan Bollard will set the Official Cash Rate on 29 January.
Latest official figures show inflation down in the final quarter of last year, but a survey last week found that business confidence was at its lowest since 1970.
Treasury has warned that deteriorating economic conditions could result in the economy standing still this year, with unemployment almost doubling to 7% next year, rising to 7.5% by 2011.
Mr Key says that, in spite of recent figures, there is no need to talk down the economy.
He says extra measures will be needed to tackle the crisis, including an employment summit in Auckland next month, in addition to the Government's action plan for its first 100 days in office.
