Joint Currency Proposed, Opposed

Joint Australian and New Zealand currency? Think again!

It’s been decades but the idea of having a joint currency for Australia and New Zealand is still being talked about. Over and over again, the idea has been opposed.

Recently, the discussion on currency union surfaced again following the economic woes of Europe. Some analysts said that a shared currency can help reduce business and operational costs and would help boost trans-Tasman business and investment.

“Anzac” was the suggested currency name.

A new discussion paper, however, shoots the idea down. The paper came from the productivity commission of Australia and New Zealand.

According to the arguments in the discussion paper, having a joint currency would give the two countries less flexibility in how they manage their own economies. The paper also argued that a shared currency requires political integration.

Interest rates would also need to be the same for both countries if there is a shared currency. The implication of this is that Australia and New Zealand would have a smaller room to move if they need to address certain economic conditions.

The bigger implication is that a shared currency would mean New Zealand would ride on the Australian dollar, a much stronger currency.

The paper said that while trade may be healthier because of a joint currency, economists cannot disregard the fact that there are risks associated with monetary unions.