Bill English

Ramping up spending on large infrastructure projects will take time, but it may be possible to fast-track a host of small projects to stimulate the economy, Finance Minister Bill English says.

Mr English yesterday said the Government's December stimulus "package" would inject about $7 billion into the economy over two years.

Labour has described the package as modest, but Mr English said it equated to a fiscal impulse of about 4 percent of gross domestic product (GDP) which was comparable to other countries.

Mr English today said the package would mainly comprise existing spending or spending promises.

That included new spending provided for in former finance minister Michael Cullen's 2008 budget, Labour's October tax cuts and National's promised April 1 cuts, which will be legislated for in December.

But Mr English said that new spending and tax cuts were already a response to recession, which New Zealand had entered ahead of the rest of the world.

National campaigned on spending more to fast-track key infrastructure projects, but Mr English said it would be almost impossible to get the major ones up and running quickly enough to boost the economy in the next two years.

However, it could be possible to bring forward a host of other smaller projects.

"We're still considering just what infrastructure projects can be brought forward," he said on Radio New Zealand.

"Now obviously the larger ones cannot be turned on by just pressing a button, but there are a number of smaller ones, and there could be quite a number of them, that we could bring forward."

Other countries have announced measures to sort out financial institutions ravaged by the international credit crunch, as well as economic stimulus packages to deal with the fallout into the real economy.

The British government yesterday announced a Stg20 billion ($NZ57.41 billion) package, or spending increases of more than 1 percent of gross domestic product funded mainly through borrowing, while in the US more money was poured into a buy up of bad debt.

Mr English said New Zealand's financial system was much healthier than in those countries, but some planning was being done in case similar things happened here.

"There is a small chance that events that have transpired elsewhere could transpire here. You can't ignore that and so we need to give some thought to the extreme event," The Dominion Post reported him as saying.

B u t Mr English yesterday said the first and most important step had been putting in place the government guarantee of retail and wholesale deposits.

He said he did not accept the assertion that the incoming Government appeared to lack the sense of urgency that was being shown by other administrations.

New Zealand's high interest rates also meant the Reserve Bank had more room to cut rates than other central banks with lower rates, and this would help stimulate household spending as mortgage rates come down.