I was slightly concerned when I saw the headline on stuff this morning “Nats eye bailout of big business”
If the government is saying ex ante that they will bail out big businesses I would be concerned as this has the potential to cause a moral hazard problem. This is where firms know they will get bailed out and thus make riskier decisions. The actual quotes from Bill English don’t appear the be as explicit as I originally thought they might be
“You’re in an environment when almost anything any government could contemplate doing is getting done somewhere in the world,” he said.
“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.”
Are quotes like this enough to give the big companies in NZ enough comfort that they will bailed out? Only time will tell….