What path is Key choosing?

John Key is finally dragging his government out of its lethargy, hinting at insulation plans and major building projects. But today's speech showed a man still wrestling with a core question: Who should pay for the crisis we're in

At the start of the week I was criticising the government for its apathy in its first three months as government. But the past 24 hours has seen ministers rise from their sun-loungers to announce some action, the latest coming from John Key this morning in perhaps his most important prime minsterial speech thus far.

Yesterday, the Prime Minister finally woke up to the fact that the current recession and the need for economic stimulus from the public purse meant is is the perfect time to start insulating and re-fitting the housing stock of this country. Despite having canned the Greens/Labour $1 billion home insulation fund, he said a widespread insulation plan would be a sensible idea.

One, it's scalable across the country; two, you've got a situation where you've a workforce that's ready to do that - the construction sector's been slowing down so there's capacity; thirdly, you do get health and social benefits; but fourthly, you get environmental benefits.

Exactly. The Australians have already acted on a similar plan this week, and we could do worse than mimic them. Uninsulated Australian homes will get roof insulation installed for free, and the solar hot water rebate will increase. The end goal – and isn't it good they have a specific target? – is that every Aussie home will have at least a two star energy efficiency rating.

No specific announcements on that yet, but Key has surely tied his colours to the insulated mast. He has also hinted today at matching the Australians on another front. Whereas Kevin Rudd will spend A$15 billion on school buildings and labs, Key told the Waitakere Enterprise Business Club this morning that the government would next week announce, "a series of fast-tracked Government building projects.  These will keep more New Zealanders working as the international crisis hits home.... They are specific projects that were chosen because they are worthwhile and can be geared-up quickly."

That's good news. One feature of the Australian scheme was that one building in each of that country's nearly 10,000 schools would be upgraded, spreading the work nationwide. Let's hope we're smart enough to follow suit. Less happily, larger projects of national significance still look to be some way off.

Larger, longer-term infrastructure projects will also be announced in the coming months.

What else did Key say today? He announced 11 changes to the tax system, and while I'm no tax accountant, the five he details in the speech all seems sensible given the times. The question is whether they can be changed back, should they not prove as sensible in less onerous times.

The other smart plan announced today is an extension of Export Credit Scheme.

We have become aware in recent weeks that some good exporting businesses are finding it particularly difficult to get short-term trade credit.

This has made it very difficult for them to continue trading in some countries.

The result is that some Kiwi exporters, particularly small-to-medium exporters, have had to turn down export orders. That is unacceptable.

I've heard of one or two instances where this was the case, including the story of a businessman with a locked-down, signed-and-sealed export order, who was ringing round friends desperately trying to get the cash he needed to accept the order. So that makes sense.

Given my concerns about the government's lackadaisical approach to the global recession thus far, I was encouraged that Key also said these announcements are just the beginning.

I want to stress that the package I have announced today is just one aspect of the Government's long-term programme for improving the business environment in New Zealand.

I hope that shows a willingness by this government to act and intervene as the times require, not that it hints at another agenda of free-market reforms that would only imperil our economy further. We'll wait and see.

What's missing from today's announcement? The obvious gap is the research and development stimulus this country needs. I can only imagine National is kicking itself for shelving Labour's R&D credits, but sadly it's painted itself into the corner politically.

One other observation from the speech today: Key seems to want New Zealanders to see him as both a big spender and big saver. His speech contains a mish-mashed philosophy of just what this crisis requires of him and his government. He wants to be seen to be spending big, he says.

The combined effect of this infrastructure spending, together with tax reductions, will mean that New Zealand will experience a fiscal stimulus amongst the top five in the developed world, when compared on a relative basis.

But, on the other hand, he, er, wants to be seen as not spending much at all.

Because I know, and you know, that if we borrow excessively to look after the taxpayers of today, we will end up saddling our children with a mountain of government debt.

The government can choose, like other developed countries, to spend its way through this recession. That means its priority is helping the economy survive another day, another quarter. But it comes at a cost, and future generations will have to bear it. The debt we rack up protecting jobs and businesses now will mean less money for our children to spend tomorrow. Will Key baulk at that? Will he risk the 2011 by not spending? Or, given the dire circumstances expected later this year, will this man who was once a fan of Sir Robert Muldoon be willing to gamble his legacy by spending and hoping?

If he genuinely doesn't want to saddle our children with debt, then he should lower our expectations and have the courage to ask us to pay the price now. Like the protagonist in the Robert Frost poem, Key has to choose path, and it will make all the difference. He can't go both ways at once. That's the core lesson this whole credit crisis has taught us – ultimately, someone has to pay.