Rethink urged on common currency

Photo / Kenny Rodger

New Zealanders should think about the benefits of a common currency with Australia despite the Prime Minister doubting it will happen, says the new chief executive of the Ministry of Foreign Affairs, John Allen.

"New Zealand needs to continue to be thoughtful about being a small currency exposed to significant volatility, particularly as a trading nation," Mr Allen told TVNZ's Q&A programme yesterday. "When you talk to exporters, one of the primary concerns that they have is the volatility of our currency. It's one of the primary barriers that they face," he said, discussing the trade role of the Foreign Ministry.

During his visit to Australia last month, John Key said a common currency was a "mildly sensible idea". It would make it simpler for New Zealand businesses exporting to the larger market of Australia and remove risks around currency movements.

The biggest problem would be the loss of control over monetary policy, which meant New Zealand's economic performance and needs would not be reflected in interest rates and the value of the dollar.

"I think there are benefits and pros and cons. But do I think it will happen? The honest answer is no," Mr Key said.

Mr Allen also said his ministry had not advised the Government to send SAS troops to Afghanistan. He would not say what advice it had given. "No, we didn't advise the Government to send the SAS to Afghanistan, we were asked for advice in relation to that decision along with a variety of other departments.

"What I will say in relation to Afghanistan is that the SAS was a capability that was recognised as being extraordinarily skilful and useful by ISAF [the International Security Assistance Force in Afghanistan] ... from New Zealand's point of view it's important that we see Afghanistan stabilised." Mr Allen also told the programme that negotiations on the United States joining the Trans-Pacific Strategic Economic Partnership Agreement (TPP) were "likely to bear fruit".

The US decided in September last year to enter negotiations to join the four-nation free trade agreement between New Zealand, Chile, Singapore and Brunei .

The first round of negotiations was scheduled for last March, but was postponed to allow the new US Administration time to conduct a review of American trade policy.

Mr Allen said New Zealand was going to have to wait a while before it was known whether the Obama Administration was going to take the TPP forward.

"All of the signals which we are seeing, suggest that the diplomatic endeavour that we've been engaged in over a very long period of time is likely to bear fruit."

Mr Allen confirmed the role of his predecessor, Simon Murdoch, as the Government's chief adviser on foreign policy had been removed from his job description.