AUD – NZD Currency Union Rejected

A monetary union between Australia and New Zealand will not generate net benefits for both countries and should not proceed, a joint study by the Australian and New Zealand Productivity Commissions released on Tuesday found.

In the discussion draft, the Commissions concluded that the costs of a monetary union with a common currency and monetary policies outweighed the benefits.

“They imply a loss of autonomy over monetary policy and exchange rate flexibility, which are important tools for macroeconomic stability,” the report said.

“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 said 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.

It said making an effective monetary union would require some degree of political union, which was unlikely and there was little popular support for such integration.

via Xinhua

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.