New Zealand should be "very worried" about the stability of the country's financial system and active government support is required to save key regional industries, says a top strategist for JB Were.
Bernard Doyle, head of strategy in New Zealand, also argues the Reserve Bank of New Zealand (RBNZ) should intervene to drop the value of the New Zealand dollar.
Mr Doyle says the RBNZ has been "playing with a straight bat" on its inflation targeting while the US Federal Reserve prepares to print an unlimited quantity of money, the Bank of England is printing money and providing cheap loans, and the European Central Bank is making cheap money available.
Mr Doyle says the RBNZ should cut the official cash rate to below its current historic low point of 2.5 per cent, use new tools to lean against the potential for an unwanted housing boom and put "soft caps" on the New Zealand dollar.
The central bank should accumulate New Zealand dollars at various price points, from 82.5 US cents through to 90 cents, at a time when the local unit has been consistently trading in recent days above 82.5 cents, and stood at 82.80 cents late on Monday.
Prime Minister John Key dismissed concerns about an unstable financial system as nonsense.
Mr Doyle said the government should be willing to support regional industries.
"Spring Creek will be an important precedent," he said.
The state-owned coal mine, which is a major contributor to the West Coast economy, is under review.
Mr Key said cabinet expected a report on Spring Creek from new Solid Energy chairman, Mark Ford, within a week.