Hot on the heels of the Euro ... the Zac

By KEVIN TAYLOR

The advent of a single European currency has renewed talk of currency union with Australia - on both sides of the Tasman.

Former Australian deputy prime minister Tim Fischer has proposed the Zac (New Zealand and Australian Currency) on the pattern of the newly introduced euro.

Mr Fischer said in the Sydney Morning Herald that the CER agreement between the two countries had been a win-win pact and it was time to embrace broader change.

"A common currency eliminates senseless interface between the two countries," he said.

His comments came as 12 European countries adopted the euro on January 1 in the biggest monetary changeover in history.

The stay-outs are Britain, Denmark and Sweden, but already Britain's Europe Minister has said the pound could find it impossible to survive alongside the euro.

Closer to home, transtasman currency union has been long debated.

Business New Zealand, which represents thousands of firms, now has currency union with Australia on a list of policy objectives it will promote before this year's election.

At last month's Business NZ "Changing Gear" conference, Dr Arthur Grimes, director of the Institute of Policy Studies, called for economic union with Australia, including a common currency.

In 2000, he and trade expert Sir Frank Holmes sparked renewed debate with the release of a study on the issue.

At the time, Canberra said it was not interested in a new currency and a new central bank with New Zealand representation, although New Zealand was welcome to adopt the Australian dollar.



Dr Grimes said the New Zealand dollar was vitally connected with our success, but suggested it was holding the country back.

New Zealand did not export enough - fewer than 4 per cent of firms sold overseas, and that percentage was falling.

International evidence showed a link between high income and high levels of export activity, regardless of a country's size, location or type of products.

But exporting from a country as remote as New Zealand involved large costs relative to the small domestic sales of many firms, Dr Grimes said.

The fixed costs of exporting were discouraging.

Some were inevitable - such as the price of a flight to Australia or the United States - but some could be reduced by policy harmonisation with destination countries.

"If firms could have the same institutions and policies in their prospective export destination as they did at home, the costs and risks of exporting would be reduced," Dr Grimes said.

One example was New Zealand's choice to retain its own currency.

"Multiple currencies hold back trade.

"It's a lesson that's staring us in the face as we observe a major new combined currency - the euro - enter the world stage."

His views have the apparent backing of businesses.

A survey in 2000 showed 80 per cent support for some kind of currency union between Australia and New Zealand.