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ANZAC dollar comments superficial, misleading

Monday, April 23rd, 2007

ANZAC dollar comments superficial, misleading

Comments by Finance Minister Dr Cullen on the benefits and disadvantages to New Zealand from an ANZAC dollar are misleading and fear mongering, the Employers & Manufacturers Association (Northern) says.

Since the kiwi dollar is the most traded of all the world's currencies and subjected to the most speculation, its value is highly prone to wild and distorting fluctuations and this is ample reason to consider alternatives, said Alasdair Thompson, EMA's chief executive.

"The value of the NZ dollar is not closely related to our actual economic performance, particularly our balance of payments deficit which is the second largest in the world," Mr Thompson said.

"Though achieving a single currency with Australia (or some other currency) is no panacea, it could be straightforward and helpful, and in some forms is not dependent on Australia as Dr Cullen has said.

"There are various options possible but the simplest one would be to fix or peg the New Zealand dollar to the Australian currency at a given level at a given time.

"Alternatively we could adopt full monetary union with Australia, and even keep our currency. Or we could keep our Reserve Bank for regulating the banks locally and setting interest rates while making the kiwi dollar equal to the Australian dollar at a given date at the cross rate at the time.
"If pegged or with full monetary union, the Australia and New Zealand dollars would be at a set differential rather than a varying one as at present, and there are pros and cons in respect of this.
"A review should consider these as well as the possibilities of linking to other currencies or even the Trade Weighted Index.

"The advantage of linking our currency to Australia's or combining with it is that the currency risk would be removed from all trading across the Tasman.

"Our traders would still need to manage their exposure to other currencies, particularly the US dollar and constantly take into account the performance of the Australian economy as they do now.

"With New Zealand's manufactured exports to Australia worth well over $6 billion a year, any potential loss or gain to competitiveness should clearly be the subject of rigorous cost benefit analysis.

"In an EMA poll three years ago businesses were split 50:50 over the adoption of an ANZAC dollar; the greatest road block to doing more business across the Tasman was summed up as 'Australian prejudice against buying from New Zealand.'

"Other polls of our members before and since have clearly favoured either a single ANZAC dollar or pegging our dollar to Australia's."


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