Trans-Tasman currency ruled out
(19 September 2012 – Australia) A draft report on strengthening trans-Tasman economic ties has ruled out a shared currency between Australia and New Zealand, as the costs would outweigh the benefits at this time.
The draft, released on Tuesday by the Australian and New Zealand Productivity Commissions identified 20 policy initiatives to strengthen trans-Tasman economic ties.
Most involve regulatory barriers to shipping and air services and some impediments to further integration in goods, capital and labour markets.
The report said excluding political union as a realistic option also limited the scope of some economic integration initiatives.
The case for monetary union had still not been established, the commissions found.
"Tying New Zealand's fortunes to Australia's currency would result in monetary policy being driven by Australian conditions, with decisions made by the Reserve Bank of Australia," the study said.
"Clearly this may not always be appropriate for New Zealand, particularly when economic conditions are different and when experiencing divergent business cycles."
Available studies of a monetary union suggest that the potential costs would outweigh the benefits.
"Overall, the commissions do not consider that the prerequisite conditions for a trans-Tasman monetary union exist, a view that is shared by most participants in the study."
Closer Economic Relations (CER) initiatives were found to have benefited both countries over the 30 years since it took effect in January 1983.
Most involve regulatory barriers to shipping and air services and some impediments to further integration in goods, capital and labour markets.
The report said excluding political union as a realistic option also limited the scope of some economic integration initiatives.
The case for monetary union had still not been established, the commissions found.
"Tying New Zealand's fortunes to Australia's currency would result in monetary policy being driven by Australian conditions, with decisions made by the Reserve Bank of Australia," the study said.
"Clearly this may not always be appropriate for New Zealand, particularly when economic conditions are different and when experiencing divergent business cycles."
Available studies of a monetary union suggest that the potential costs would outweigh the benefits.
"Overall, the commissions do not consider that the prerequisite conditions for a trans-Tasman monetary union exist, a view that is shared by most participants in the study."
Closer Economic Relations (CER) initiatives were found to have benefited both countries over the 30 years since it took effect in January 1983.
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