By DANIEL RIORDAN
Reserve Bank Governor Don Brash has told business leaders that despite their support for transtasman currency union, the pros and cons of such a move were far from clear.
Dr Brash told the Employers and Manufacturers Association in Auckland that he was not surprised that most respondents to a survey favoured union.
"Of course business is in favour ... I suspect if the business community were asked if they were in favour of lower taxation they would also register a strongly favourable reaction.
"The real question is not whether less currency uncertainty would be helpful but whether less currency uncertainty would compensate for the costs of a currency union, such as the risks of greater variability in output and domestic inflation. And the answer to that question is much less clear."
Dr Brash said he was not prepared to take sides, because it was a decision for politicians, not central bankers. As well, there did not appear to be a clear conclusion. Even Reserve Bank staff were split 50/50.
"But it is crystal clear that currency union is not a magic path to substantially faster New Zealand growth ... [and] no substitute for domestic policies that promote stronger productivity growth."
Brash: tread warily on currency union
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