New Zealand Consider Single Currency With Australia
05 April 2012 10:00am - Jack Stupple

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New Zealand Consider Single Currency With Australia

The productivity commissions of Australia and New Zealand have suggested that a shared Trans-Tasman currency could lower business costs. New Zealand Productivity Chairman, Murray Sherwin said in a paper released by the two commissions, “New Zealand and Australia are close neighbours that already benefit from significant economic integration. Our job is to advice on potential ways to further enhance that integration for the benefit of both countries. We have been asked to look at options for boosting productivity through reducing the regulatory burden on business, increasing competition and encouraging closer economic operation.”

In the paper the commissions says the lower transaction costs of a single currency needed to be measured against differing business cycles such as the recent boost to exports caused by the recent mining boom. The report says, “On the one hand, there are potential benefits in avoiding the transaction costs associated with having separate currencies.” However, it added, “On the other, where business cycles and economic changes affect the two countries differently, there could be costs in not having independent exchange rates. The recent experience of countries in the Eurozone is instructive in this respect.”

The two economies are somewhat mismatched as Australia has been New Zealand’s largest trading partner in recent years but New Zealand is Australia’s fifth largest partner.