By RICHARD BRADDELL
Australian indifference may not be the only obstacle to transtasman currency union, but it may be the largest.
Peter Jolly, a New Zealander who is the chief economist for the National Australia Bank in Melbourne, said that a reaction to Prime Minister Helen Clark's comments on currency union had been: "Who would want to attach to a currency that's got the population of Wollongong behind it and is going down?"
The Prime Minister, interviewed in New York, said that more consideration needed to be given to the creation of an Anzac dollar, although she conceded that there were more advantages for New Zealand than Australia.
The director of the Institute of Policy Studies, Dr Arthur Grimes, said interest was growing in the concept in Australia.
It had been discussed in the context of Asian currency blocs at a conference at the Australian National University in Canberra last week.
"Australia has finally realised that they can't just stand aside from these issues."
Dr Grimes also said that for the first time talk was heard of Australia linking its currency to the United States dollar.
And while currency union might have little direct impact on Australia, it did reflect on its leadership in the region.
"Australia does not like to be left out of those conversations," said Dr Grimes.
Mr Jolly said currency union had its pros and cons but, on balance, New Zealand was likely to make marginal gains from lower transactional costs.
Dr Grimes said the biggest winners would be small businesses that could not manage or afford the cost of currency hedging when they expanded to Australia, and so were not making it into the middle ranks where the biggest productivity gains were made.
But even if sentiment in the two countries swings in favour of currency union, the question remains of how it might be achieved.
One approach would be for the New Zealand dollar simply to disappear, with the conduct of New Zealand's monetary policy being taken over by the Reserve Bank of Australia.
But the director of the Institute of Economic Research, Alex Sundakov, cited Ross Garnaut, an Australia academic who has argued that currency union would require a treaty between the two countries to create a new central bank.
That would be of benefit to both countries, because the new central bank would have an extra layer of independence from the political process.
Australian hump in way of one currency
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