Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Currency Union The Only Solution

Import News from the Importers Institute

Adopting the Australian dollar is the only real solution to New Zealand's economic woes, says John Edwards, chief economist of the HSBC Australia and New Zealand.

In a speech to the Importers Institute/HSBC Conference today, Edwards said international demand for the kiwi dollar was likely to fall further, as minor currencies moved out of favour.

"New Zealanders have got to think seriously about a common currency," said Edwards. "Within a few years it will not be a good market in which to easily hedge New Zealand's offshore borrowing. At that point the hedge market will require either a lower and lower currency or higher and higher interest rates.

"The only real solution available to my mind is to adopt a common currency with Australia."

This would have two immediate effects, said Edwards. "New Zealand immediately transfers all its existing New Zealand dollar obligations into Australian dollars. It also gives New Zealand borrowers access to the Australian dollar foreign exchange market, which is many times bigger than the New Zealand foreign exchange market."

It would probably also open up trade between the two countries, removing the exchange rate barriers smaller firms now face.

"Finally," said Edwards, "adopting a common currency solves the problem of running an independent monetary policy in a country of less than four million people, and an economy one sixth the size of Australia's.

"It's tough to run a monetary policy for such a small economy that is open the world, with a floating exchange rate, a very large trade share, very large capital flows, and - to cap it all - a very tight inflation target.

"By integrating with the monetary policy of a larger neighbour New Zealand has a chance to muffle the shocks."

Adopting the US dollar instead was not a real choice, said Edwards.

"A currency union really means a common monetary policy, and while New Zealand has some chance of making arrangements to influence Australian monetary policy, it has no chance whatever of influencing the policy of the US Federal Reserve.

"New Zealand cannot develop a closer political relationship with the United States, which is too big, too diverse, too preoccupied even to notice New Zealand's attention.

"With Australia, however, it already forms an economic union ... and it shares history, constitutional arrangements and geographic propinquity, which make closer political union at least a distant possibility."

* * *

[ The text of full speech can be downloaded from http://www.silva.co.nz/conference/ ]

* * * Previous Import News items are published on our Internet site http://www.importers.org.nz. If you do not wish to be included in this mailing list, please reply to this message with the word REMOVE in the subject line. If you would like us to send Import News to friends or associates, please ask them to email info@importers.org.nz with the word SUBSCRIBE in the subject line.


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Onetai Station: Overseas Investment Office Puts Ceol & Muir On Notice

The Overseas Investment Office (OIO) has issued a formal warning to Ceol & Muir and its owners, Argentinian brothers Rafael and Federico Grozovsky, for failing to provide complete and accurate information when they applied to buy Onetai Station in 2013. More>>

ALSO:

Tomorrow, The UN: Feds President Takes Reins At World Farming Body

Federated Farmers president Dr William Rolleston has been appointed acting president of the World Farmers’ Organisation (WFO) at a meeting in Geneva overnight. More>>

ALSO:

I Sing The Highway Electric: Charge Net NZ To Connect New Zealand

BMW is turning Middle Earth electric after today announcing a substantial contribution to the charging network Charge Net NZ. This landmark partnership will enable Kiwis to drive their electric vehicles (EVs) right across New Zealand through the installation of a fast charging highway stretching from Kaitaia to Invercargill. More>>

ALSO:

Watch This Space: Mahia Rocket Lab Launch Site Officially Opened

Economic Development Minster Steven Joyce today opened New Zealand’s first orbital launch site, Rocket Lab Launch Complex 1, on the Mahia Peninsula on the North Island’s east coast. More>>

Earlier:

Marketing Rocks!
Ig Nobel Award Winners Assess The Personality Of Rocks

A Massey University marketing lecturer has received the 2016 Ig Nobel Prize for economics for a research project that asked university students to describe the “brand personalities” of three rocks. More>>

ALSO:

Nurofen Promotion: Reckitt Benckiser To Plead Guilty To Misleading Ads

Reckitt Benckiser (New Zealand) intends to plead guilty to charges of misleading consumers over the way it promoted a range of Nurofen products, the Commerce Commission says. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news