Finance Minister Michael Cullen has accused National leader John Key of panicking under pressure from Australian-owned banks over the Government's deposit guarantee scheme.
The Government has guaranteed retail loans in the face of the international financial crisis, creating a $150 billion contingent liability.
But Mr Key has called for quicker action on work to extend the Government's retail bank deposit guarantee scheme to cover wholesale bank deposits. That would extend the contingent liability to $450 billion.
Under a wholesale scheme, the Government would guarantee money loaned to New Zealand banks by foreign banks, a scheme being established in Australia and in place in other countries.
Dr Cullen today said decisions on the matter would be taken before the election, but acting prematurely could create big problems in the future.
"We'll want to see the Australian scheme when they announce final details. We will not want to be flying blind in that regard," he said.
"We want to be sure we have a scheme that does not load excessive risk on to the New Zealand taxpayer."
He said Mr Key and his finance spokesman Bill English, in calling for faster action, were panicking under pressure from the Australian-owned major banks. which were not exposed to any immediate risk.
"We are not going to be stampeded by the Australian banks into hasty decisions. "That doesn't mean to say there is an indefinite wait at all, but I'm actually getting quite concerned that ... Mr Key and Mr English simply dance to a tune played by the Australian banks." He said he did not think people were taking them seriously.
"What I think they do though is they show an attitude of mind which is to get slightly panicky in a situation of this sort which actually requires the exact opposite -- to think carefully through what it is you're going to do and remember ... where the prime responsibilities of the New Zealand government lie." He refused to reveal the options under consideration for a wholesale guarantee.
New Zealand banks are largely owned by Australian parent companies and receive much of their funding from them and other overseas sources.
There have been indications that the banks have enough cash to last to Christmas, but Mr Key said if they did not get an immediate confidence boost they would have no option to slow down their lending which would damage the economy.
Treasury yesterday released more details of the Crown Retail Deposit Guarantee Scheme and said it expects to start announcing approvals for banks from Tuesday.
