Bailout loans and 9-day fortnight top proposals

Taxpayers are being asked to stump up as much as $1 billion in loans to business, as workers are urged to sacrifice a day's pay to save the jobs of their "mates".

After a day of talks between the country's top business, banking, government and union leaders, a list of 20 job-saving proposals has emerged but many will be controversial, including a nine-day fortnight, with the Government to pay for training or education on the 10th.

Others include a 1400kilometre cycleway from Cape Reinga to Bluff, creating up to 3700 jobs at a cost of $40 million.

But the big-ticket item is a call for the Government to pour money into an equity fund to help keep small-to-medium-sized businesses afloat, as the banks face a mounting backlash over a squeeze on credit.

The call from banks for taxpayers to share the risk of keeping small businesses afloat followed a stern message by Reserve Bank governor Alan Bollard, who warned banks not to underestimate the level of anger in business circles over tough new lending rules.

While banks were entitled to be conservative, "they have profited from good times in this economy, and we expect them to be there for the tough times too", Dr Bollard said.

It was revealed at the summit that banks have more than $200 billion in liquidity, and that the amount has increased by $3.4 billion in the last quarter as some hoard their cash. The Government is facing a Budget deficit of $8 billion.

The Canterbury Employers Chamber of Commerce chief executive, Peter Townsend, backed Dr Bollard's call; access to credit was the No 1 issue facing businesses.

He knew of five big Canterbury exporters with export orders who were close to collapse but could not get more loans from the big four trading banks, he said. But the Bankers Association chairman and ANZ National Bank chief executive, Graham Hodges, said as the downturn became tighter, there would be businesses which had taken on a lot of debt and could not afford to take on more. "There is some anxiety around that."

The Government is being asked to put up as much as $1 billion for an equity investment fund, to be run commercially in partnership with banks and institutional investors. Mr Key said it was a good idea, but there was a lot of detail to be worked through before the Government would commit to it.

More than 200 delegates attended the day-long summit, as New Zealand endures a recession that is expected to turn uglier. 

Businesses have started laying off staff, and others are asking staff to take leave or work four-days-a-week, as global trade collapses and demand dries up. The Government seems set to give the green light to a call for a nine-day fortnight which employers and union leaders believe could save 20,000 jobs, at a cost of $60 million. Workers would lose a day of work a fortnight, and receive training or education.

Treasury secretary John Whitehead warned delegates that the Government could not afford to spend its way out of trouble and if debt continued at projected rates, it would equate to $1000 owed by every man, woman and child.

- © Fairfax NZ News