A DRAFT report to be released today has ruled out the idea of a joint New Zealand and Australian currency.
The report by the Australian and New Zealand Productivity Commissions identified 20 policy initiatives to strengthen trans-Tasman economic ties, mostly involving regulatory barriers to shipping and air services.
However the case for a monetary union had not been made.
“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,” Fairfax NZ reported.
“Clearly this may not always be appropriate for New Zealand, particularly when economic conditions are different and when experiencing divergent business cycles.”
The potential costs of a union would far 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.”
The report found Closer Economic Relations (CER) initiatives had benefited both countries over 30 years.
Tariffs and quantitative restrictions had been eliminated on most goods, people moved freely over the Tasman and CER had expanded into new areas.
However “barriers to further integration remain and new issues will emerge,” the study said.
“Addressing them is becoming more challenging, however, as the focus shifts to more complex areas including many involving regulation of services.”
CER initiatives should continue to be outward-looking, and the trans-Tasman agenda now needed to fit with the broader challenges and opportunities from investment links with Asia.