Joint currency plans 'are impractical'

Ambitious plans to introduce a joint currency between Australia and New Zealand are majorly flawed, a new report has concluded.

A study has been conducted by the Productivity Commissions in both countries and it has found that the revolutionary move would ultimately prove to be "impractical".

The cost of setting up a monetary union between the neighbouring nations would be huge and there are fears that New Zealand could lose some of its identity.

Australia's economy is around seven-times the size of New Zealand's and financial decisions would most probably be made by the Reserve Bank of Australia.

Naturally, people are concerned that any new policies would automatically favour the larger country.

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

"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 continued.

According to the report, any hope of establishing a joint currency would depend on greater political union between the two, which is unlikely to happen.

New Zealand has traditionally been a major hotspot for Australian tourists, which is unsurprising given the relatively short distance involved.

Although both nations use the dollar, the differences between the two can be stark, so Aussies should make an extra effort to search for the best exchange rates, as there are huge savings to be made.

At the moment, one Aussie dollar will get you more than NZ$1.26 in return.

Travellers from Australia have benefited from the strength of their currency in recent years, particularly when booking trips to the US and Europe.

However, there have been suggestions that a downturn in the booming mining sector could see the dollar slide.

This is why travel credit cards – which allow users to lock in the rate of exchange at the time of purchase – are so important.

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