Australia and New Zealand To Share Dollar?

There's always been a close relationship between Australia and New Zealand. We see it as being more like sibling rivalry than best friends but given that there's a lot business transacted between the two countries, any moves that make that easier need to be looked at. So, is a single ANZ currency in the wind?

A recent report [ABC] says that the Productivity Commission is seeking public feedback on the idea of a single ANZ currency.

I'm not a regular visitor to NZ - I get over there every year or so but not having to swap money would be very handy. Coupled with the potential for Australia and New Zealand to share a common border thus changing travel between the two nations from international to domestic status this could be hugely beneficial as a way of promoting both business and tourism between the two.

Full documentation regarding the review is available from the Trans-Tasman Review website [PDF Link] and includes details on how to provide feedback to the review.

Does this seem like a good idea? Or is this just a stepping stone to New Zealand becoming the seventh state or third territory?


Comments

    No international border= no duty free booze.

    that is all.

      Yeah this =P

        On the other hand, cheaper flights.

    I've only ever visited NZ once - but I think it's a good idea. So long as it doesn't mess with the strength of the Aussie dollar. It would certainly make a NZ visit sound more enticing to me; not having to worry about passports or currency.

      Given our economy is getting screwed by the high dollar, lowering it wouldn't be a bad thing

      how well did the EU work out, one country's debt is threatening to bring down anothers. Lets remain an independent, self determining nation

    oh hells no! It would most likely impact our AUD and not for the better.

    But how would you then manage the reserve bank and interest rates? It would effectively make NZ the 7th state, economics-wise, simply by relative weights of our economies.

    What happens when NZ is in boom/bust while Aust is in bust/boom? For example look at... I don't know... Europe.

    For it to work there would have to be political union as well as currency union - so fiscal transfers can counterweight any currency issues.

      Nah you're crazy Lindsay. Shared currencies are the best. Just look at how well the Euro turned out!

      not such a big issue New Zealand is highly correlated with the Australian economy anyway. So if we are in boom they normally are as well.

        So that explains the rather significant gap between the AUD and the NZD...

          There are many factors that contribute to the strength of a currency. Just because there is a gap between the AUD and the NZD doesn't mean one economy is doing worse than another.

          This could be a good thing depending on the regulations in place when implementing it, there were many mistakes with the euro, but this would be simplified because it is only with two countries not multiple countries.

          However, there is the question if the economies of Aus and NZ could even be compatible with each other.

          Or could it be possible that NZ starts using the AUD as their currency as some places use other country's currencies as their currency but have separate economic policies, like there are a few countries that use the USD as their currency but they have their own economic policies...

            "Just because there is a gap between the AUD and the NZD doesn’t mean one economy is doing worse than another."

            It's all about perspective. The NZD may be doing well by NZD standards but by our economy's standards? It's a joke, just like the AUD was 5-10 years ago. The only difference is that the AUD has shown strength in the past on many occasions whilst the NZD has always been weak.

    I think Australia adopting the kiwi dollar is a great idea. Should also grab the All Blacks and John Key in the process

      Please take Donkey with our compliments!

      Maybe we should start claiming their actors as our own too! Mel, Nicole, Russel... oh wait, what's the change again?

        Mel Gibson and Nicole Kidman are both not kiwi's... if thats what your angling at there. Kidman was born in Hawaii to American parents and raised in Aus and Gibsons American family moved to Aus when he was 12. You can have Russel Crowe and his Rabbitos back.

    I’m not sure this proposal would be a good idea. Sure it would be very convenient for travellers and promote more business, but the AU/NZ economies are vastly different.

    The introduction of a single currency would also include the introduction of singular monetary policy, harmonised tax rates and fiscal policy. Australia already experiences difficulties with its ‘two speed economy’ and adding a third factor to would only serve to complicate matters and not necessarily work in the interest of either country.

    The report sums this problem up nicely where it says a ‘...Currency union is one area where the loss of local decision-making can be problematic. On one hand, there are potential benefits in avoiding the transaction costs associated with having separate currencies. On the other, where business cycles and economic changes (such as the ‘mining boom’) 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.’

    Also, this is only an issues paper designed ‘...to assist individuals and organisations to prepare submissions to the study’. The paper only outlines the benefits and issues associated with various levels of greater integration between the two countries, of which one is a single currency.

    We'd have to make our $2 coin bigger than the $1 and get rid of our 5 cent peice.

      They sound like positives to me!
      NZ was on board to become a state of Australia back at the time of Federation, but they bailed at the last second.
      It makes sense for them to become closer aligned to us. I'm not sure how much sense it makes for us to become more aligned with them though...

      excellent, 5c has what use now besides the psychology of 19.95, 5.95 etc ? could be argued that even 10c is superfluous I think

        If we got rid of the 10c coin we would need to replace the 20c with 25c. If we didn't, and you pay for a 90c lollipop with a $1 coin you wouldn't get any change*. I agree with you though; a 25c, 50c, $1 and $2 coin would save time during transactions, reduce the cost of minting coins and make our wallets less painful to sit on.

        *Unlike the loss we get if we pay with cash instead of EFTPOS currently ($0.99), this loss could be avoided with a 50c and two 20c which would result in some people using more 20c coins than they otherwise would, reducing the time saved with the new system

    PB12IN - is there really is such thing as an "Australian economy"? The economy is made up of lots of sectors and each goes through times of boom and bust. I'm not certain that adding NZ to the mix would make a huge difference to that (the total population of NZ is marginally smaller than Sydney. Does that matter?).

    I'm not certain that comparisons to the Euro Zone are massively relevant. That's a trading and currency zone with 17 countries. They have significant cultural and political diversity. Although NZ and AU are different, they are not as different as European countries. And the recent events of the Euro Zone can be instructive in how to do it better.

    I doubt that this will actually get any further than the preliminary investigation stage but it's nice to see government looking at something that goes beyond the election cycle once in a while.

      You miss the key point, it isn't the difference in cultures that matters, it's the difference in economies. They are very different.

      New Zealand obeys a completely different cycle. A merged currency would in effect just be the Australian dollar, so, say there's a mining boom in Australia and dairy prices slump for New Zealand farmers, we'd see huge economic disruption, likewise if dairy is booming and mining in a slump, NZ inflation would rip.

        It doesn't have to be much different to how Australia is now - While the Govt uses monetary and fiscal policy to manage Australia's overall economy, the local State governments also play a major part in their own independent economies. The US is also based on a union of independent states , each with their own local laws and Govts - for example, there is a big difference to the economics and market drivers of states like California and Nebraska.

          and that's working out great for the rust belt. :P
          seriously thought, you took an American from the 70s on a walk through Detroit today and they would be convinced that the Soviets had won :(

    If you look at the change drawer of some cash registers, you'd think we already did share a currency with the 10 and 20 cent pieces that sneak in!

    our economy could easily absorb the NZ economy. You would not get a EU type even unless the whole of NZ sank into the ocean...

    http://www.wolframalpha.com/input/?i=Economy%3A+Australia+vs+New+Zealand

    There might be benefits but the cost is a loss of sovereignty for the two countries. The nightmare is how to divide that loss of sovereignty to the other - based on population? GDP? Simple 50/50 split? No matter what option you choose there will be a massive, vocal opposition to it making a unified currency all but impossible.

    NZ can adopt the AUD any time they like.

    Considering that the NZ dollar is around 25c less exy than ours, how would you account for the disparity? We would in effect be propping up their dollar. Seems to me that we should only do this if NZ becomes a part of the Australian state system.

    Have local politicians learnt nothing from Europe?

    Apart from anything else, New Zealand's economy isn't in sync with Australia's, we need our currencies to float in order to stay competitive.

    IN this relationship New Zealand would be Greece, Australia would be Germany - and we know how that ended in tears.

      To be fair, there are no local politicians advocating a currency union. Just the Productivity Commission asking for opinions.

    I don't know why this is being put to consultation. Obviously for most people this would be convenient. However, there are a number of practical reasons this won't happen.

    1. If we've learnt anything from the GFC, its that we need shared financial regulation. This would require a massive loss of sovereignty for one of the countries. In fact, if we start sharing that level of regulation, we should probably just form one country (not the worst idea).

    2. The historical dollar disparity provides NZ a competitive advantage. Right now the East coasts states can't manage the high-dollar, so how could NZ? And they're federal Government wouldn't even receive the large mining royalties in WA to make up for it. Again. we'd need the sort of wealth redistribution possible only within a country, not between.

    Light hearted points;
    - Ask Germany if it had a time machine, whether it would have signed on with Greece.
    - Eventually, NZ will run out of LOTR movies to make. IS Australia prepared for this?
    - I'm not really interested in sharing our currency unless we are given a free Hobbit each.
    - In Australia, we have inflation, in NZ they have unflation. As such, the two economies are uncompatable.
    - Does this mean we get to give Russel Crowe back?
    - Other than butter and infected apples, what is the NZ GDP?
    - Will we be able to merge rugby sides (ie, will there be an Australian in this generation who experiences rugby success)?
    - Does this mean we get Flight of the Concords?
    - Can we just have the north island?
    - Will we be building a tunnel or flying fox (I would totally be up for that)?
    - Will we be merging the unemployment benefits schemes, and if so, how will Kiwis afford to holiday in Australia?
    - Does this mean Australia will finally have decent skiing?
    - What will we be calling the mutual currency, the ANZAC (Australia NZ Amalgamated Currency)?
    - What does the Queen have to say about this, and does anyone care?

    It would make more sense for Australia and China to have the same currency. That would benefit both countries, especially Australian tourism.

    I think it's a great first step in making Australia 'The West Island'

    Yes.. they are different economies.. but who said diversity was a bad thing.. I don't think a merged currency will happen.. but it would certainly make life interesting..

      the whole UN will...
      there is not that much benefit of trying to unite with NZ

    There's no political will in NZ to give up economic sovereignty and adopt the Australian dollar (nor would that be an easy prospect), and there's no political will in Australia to scrap the Australian dollar and adopt a new trans-Tasman currency. So whether it would be a good idea or not (I'm a kiwi living in aus and I'm definitely not sold on it) it's all something of a moot point - because it ain't gonna happen in this generation.

    Yeah, Australia just needs to hurry the heck up and absorb New Zealand.

    This is a terrible idea. I don't have the time to explain how bad this idea is. There would be issues with monetary policy operations, we be locked to their cyclical effects (more likely they to ours due to relative size of economies), our currency would suffer directly for all their actions from debt ratings through to foreign investment policy. This will never happen for the same reason little countries struggle to get into the EU. They have no purchasing power and would effectively "devalue" the currency and intern assets.

    Lets just annex the fuckers. Its not like they have a military or anything.

      http://www.youtube.com/watch?v=k9kkVo7Rv8g (3:13 onwards)

    Does that mean we could finally get a decent front row for the rugby ?

    If it did drag down the Aussie Dollar a bit that could be a good thing, that mofo being so high is hurting a few of us!

      Lies! Get into a real industry mate :P (yes this is a joke)

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