Australasian dollar?

Reading this stirred my thinking on just how far we take the single economic market between ourselves and Australia: http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10592727&pnum=0

I've historically been against a single currency for Australia and us - basically because IMO the medium-term pain for our economy as we transitioned to the same economic cycle would be too much.
But I now wonder if the volatility of the NZD is actually a worse problem.

Thoughts? Should we ever move to use the Australian dollar?

you probably know this line of thinking g-dub but the standard answer (I believe John Key stated it in Melbourne recently) is that no we shouldnt because our economy is driven by soft commodity products meat wool timber fish etc whereas theirs is hard commodities eg coal copper iron oil. These two sets of commodities have quite different economic cycles and so if we were the lil partner the RBA etc would be setting policies inappropriate for our trading cycle.

Yeah but in that same vein, WA vs NSW have different economic bases. Hell, Greymouth and Auckland CBD have different economic bases. But that is the thinking that always made me anti it - I think you would end up on a similar economic cycle by being forced into it - but that pain to get there would be a big deal.
Just wondering if the reduction in volatility makes it a net gain though. That jumping around is what is really killing our exporters, not the nature of the interest rate cycle

If we adopt the AUD sure, common currency, but that will be the only way it happens. There is no appetite for it over the Tasman

they just need to get better money $geek$ and hedge appropriately - why are they not doing this???
yes its a cost of business if you are an exporter - suck it up and create some certainty in your cash flow.

Sure, but there is inherent transaction cost in hedging. It is more certainly expensive at a macro level to have to hedge against a volatile dollar than have a (more) stable dollar in the first place.

Like I said, dunno. You'd certainly have lower transaction costs with Aus itself, which is a big thing given it's far and away our biggest trade partner. And I do believe that NZ would end up on a similar economic cycle just through nature of response to a central fiscal policy - I'm not sure how far out of sync we are now anyway. Not sure what the research has shown regarding the Eurozone countries on this though.

Aud/NZD rate has actually been relatively stable - which is very supportive of CER and could be interpreted as a form of natural monetary union.
But, also what that tells us , is that in fact the Aud is just as volatile and subject to the same global forces as us so benefits of assuming that currency are spurious because the bottom line is everybody is dancing to the same tune and we would still experience similar volatility.
Retaining our independence still allows us to tweak things in our preferred direction though.

this is relevant

http://www.interest.co.nz/ratesblog/index.php/2009/08/26/top-10-at-10-ralph-norris-reopens-trans-tasman-banking-regulation-debate-4-more-years-of-bernanke-dilbert/

Norris then goes on to point out the real politik of this issue. The crisis last year demonstrated that the parent banks in Australia were in control anyway because they pumped cash across the Tasman when the New Zealand arms couldn’t raise cash on international markets.

Hickey adds his few cents worth :
New Zealand is now essentially in the hands of the Australian government anyway. Our debt binge of the last 5 years and our financial connections to Australia are so strong that we are effectively underwritten by Australian savers and the Australian government.

Interesting article peat - I wonder just how far an Australasian banking regulator would take it though? Does that mean we lose the Reserve Bank into the RBA and therefore interest rate setting is done centrally? Presumedly not?

no that is the distinction.
with one, banking is regulated only by their body but the RBNZ retains its role re monetary policy (i guess) but it obviously diminishes the role of the RBNZ to a signiificant degree.
cant see it happening tbh