The New Zealand dollar is set to overtake the Australian dollar probably within a few weeks.
Some financial analysts tipped the breakthrough would happen yesterday afternoon, but the Reserve Bank of Australia’s decision to hold interest rates at 2.25% postponed it.
Parity between the dollars, when it happens, will be the first time since 1974. Effectively, the two currencies are already at parity. The New Zealand unit was within a fraction of a cent of the value of the Aussie yesterday. The mid-market rate was AUD 1 to NZD 1.007. The Australian dollar then gained a cent or so after the Reserve Bank’s decision.
For Australian tourists heading to New Zealand, virtual parity between the dollars means the end of being pleasantly surprised when examining credit card statements on returning home.
Parity will encourage tourism in the other direction, with Kiwis delighted how far their dollar goes on Australian travels.
The approach of dollar parity has sparked new discussion in New Zealand about the possibility of having one trans-Tasman currency valid for both countries.
Australia is strugging against below-average growth, sluggish consumer spending, sinking commodity prices (particularly iron ore), climbing unemployment and weak consumer confidence, creating a lacklustre business investment environment.
New Zealand is on a roll. Its governance is seen as superior and economic conditions are looking good. Quality dairy produce is in big demand on the world market, while commodities are not. Unemployment in Australia has hit a 12-year high of 6.3%. In New Zealand, it’s slightly over 5%.
For the meantime, Australian tourists will have to forget the 20% discount they used to receive on New Zealand prices, courtesy of the exchange rate. Nowadays, whatever price you see in New Zealand shops, that’s what it costs in Australian dollars.
And here’s a surprise: some Aussie beers are cheaper at supermarkets in New Zealand than anywhere in Australia.
How do the brewers explain that!
Written by : Peter Needham in Paraparaumu, New Zealand