Four decades ago, the NZD was close to a parity with the Australian dollar. That part of history may repeat itself again as the New Zealand Dollar has steadily been pushing itself higher against Australian Dollar for the last few months.
Known colloquially as Kiwi, the NZD rose almost 8% against the Aussie, slang for Australian Dollar since the beginning of November. The Kiwi was found trading 4% higher this year at A$0.9572 in late Wellington trading On Tuesday. On the very same day, it reached an overnight high of A$0.9582, a mark closest to Aussie.
An economist called Michael Judge, who’s working in a Sydney based company called OzForex has observed this trend and remarked “The New Zealand dollar has continued its impressive run…the prospect of parity for the first time in 30 years has been thrown around.”
The relation between Kiwi and Aussie is a bit strange; both are regarded risk currencies by economists; commodity prices linked to global growth expectation are often being tracked by the pair. But they have begun to part ways as Australia’s mining and coal exploration segment is moving downward, and New Zealand’s performance in the financial sector has been looking promising.
The main pillar of New Zealand’s economy is agricultural export, and the country seems to be heading pretty fast on that road. Despite declining dairy prices, New Zealand is pushing ahead its economic growth; the country’s GDP in this year has seen a leap of 3.2% from a year earlier.
The Australian export businesses are delighted as Kiwi is crawling toward parity with Aussie. Economists are hoping beef, sheepmeat, tourism and wine making companies in Australia will gain the most.
An economist called Craig James has explained how tourism could helping the small, local businesses of Australia. In his own words “It’s good news clearly for a number of sectors here in Australia – fewer tourists going to New Zealand means more support for domestic tourism, and may also provide some support for retailers if people are staying here rather than going overseas.”
Not everything is rosy for New Zealand as there’s one downside of a better performing currency, which is the companies in New Zealand might find Australia a more sought after destination for decreased cost of operation, due to a waning currency.
However, it’s best not to reach to any judgment as the trend is very recent. It’s better if we wait for some more time, observe this trend and then arrive at a culminating judgment.