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Aussie-Kiwi currency a ‘bad idea’

The Australian economy is flagging and the New Zealand economy is booming.

In a complete reserve of fortunes, demand for Australia’s commodities like iron ore are falling while New Zealand’s dairy industry is growing exponentially.

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The Kiwi dollar has flirted with parity with the Australian dollar in the past month, reaching as high as 99.7 cents on Easter Monday, reigniting debate for a trans-Tasman currency.

Oliver Hartwich, chief director of public policy think tank The New Zealand Initiative, said it would be disastrous for the two countries to combine currencies.

“I don’t think there’s any appetite in New Zealand at the moment to go into a currency union with Australia,” Mr Hartwich told ABC’s Radio National program on Tuesday morning.

The New Zealand dollar is the closest it has ever been to parity with the Aussie.

The New Zealand and Australian dollar are closest to parity since the 1970s.

“The idea of course is nothing new. It comes up every few years.

“I recently heard our prime minister John Key talking about it at a business function and he dismissed it out of hand and said we should stop talking about it because there are far more important issues for us to tackle here.

“I hope it will never happen because I think it will be bad for both countries.”

Mr Hartwich said setting monetary policy for the whole of the two countries would be incredibly complicated because they are built on “very different foundations”.

New Zealand Prime Minister John Key

New Zealand PM John Key has been praised for his monetary policy. Photo: Getty

“The experience in the Eurozone should come as a warning to us because in the end it is not enough to have very close cultures and integrated economies if you don’t have fiscal equalisation as well.”

“We had of course a massive Australian commodity boom for the past 20 years. We’re now seeing the phase where Australian commodities are on the way down and New Zealand commodities, soft commodities like dairy, are on the way up.

“Therefore we will never have the two economies completely in sync. This is why the currency is now heading toward parity.

While Mr Key and Prime Minister Tony Abbott both run conservative governments, Mr Hartwich said Mr Abbott had a lot to learn from his Kiwi counterpart.

“We have a very good government at the moment with a very clear commitment to take New Zealand back to budget surplus,” he said.

“These reforms were not implemented overnight but they were carefully prepared. I think that’s where the Australian government could learn a thing for two from John Key’s approach to policy making.”

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