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Australia/NZ currency union rejected

A CURRENCY union between Australia and New Zealand has been rejected by top economic think tanks in both countries, with Europe's woes with the euro weighing heavily on the proposal.

For decades a shared currency has been floated by economists as one way of reducing business costs and boosting trans-Tasman trade and investment. The ''Anzac'' was suggested as a name.

A joint discussion paper from the productivity commissions of Australia and NZ will dismiss the proposal today. It says that without political integration, the move would give each country less flexibility in managing its economy.

Monetary union would require interest rates to be the same in both countries, giving them less room to respond to local economic conditions. Currencies also tend to act as ''shock absorbers'' for economies, by falling in times of weakness, which helps to make exporters more competitive.

But the much smaller size of NZ's economy means it would probably be hitching itself to the stronger Aussie dollar.

Read more at Brisbanetimes.com.au
 

Topics:  exchange rates



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