Bernard Hickey: Lucky we kept our dollars and sense

We dodged an Anzac bullet. There was a time around five years ago when many of New Zealand's policy grown-ups believed an Australasian currency union was inevitable.

It seemed the logical end to the deepening integration of the New Zealand and Australian economies through closer economic relations (CER). Even the trading Prime Minister, John Key, was musing aloud that it might be a good idea.

No more.

An opinion poll released this week by the Frank Lowy Institute think tank in Australia showed voters on both sides of the Tasman are now against a single currency.

The poll in mid-April of 1000 New Zealanders over 18 found 46 per cent oppose some form of Anzac dollar, up from 42 per cent five years ago and above the 43 per cent who support such a currency. A poll of 1005 Australians over 18 found 54 per cent oppose a joint currency, up from 42 per cent in 2007.

Many economists and central bankers were always lukewarm on the idea, which has always seemed more politically than economically-driven. In 2007, many pointed to the apparent success of the Eurozone as a reason for such a currency union.

Again, no more.

This weekend's election in Greece is all about the catastrophic failure of a currency union to deal with differences in the structures of economies within that union.

The global financial crisis has exposed the Eurozone's inherent flaws, hidden for years by property bubbles and rampant lending by European bankers determined to leverage their way to glory (and some really big bonuses).

Now the tide has gone out, Europe's bankers and the Eurozone are exposed in all their economic nakedness.

Germany was the prime beneficiary of the Eurozone. The new currency was weaker than the Deutschmark, making German exports more competitive in the eyes of Southern European buyers.

Germany generated big trade surpluses and lent those surpluses to its neighbours to buy yet more German exports.

It's no accident that Greece and Spain are now awash with heavily devalued Porsche Cayennes and BMW X5s while Germany is struggling to get Greeks and Spaniards to repay the debts.

Now the only solution is for Germany to write enormous cheques to keep Southern Europe in the euro or take one almighty hit by forgiving the debt. The first is politically untenable. The second would wipe out Germany's banks.

Many economists now believe the cleanest and most effective option would be for Germany to return to a much stronger Mark.

This is one almighty mess caused by the formation of a single currency without common economic fundamentals or fiscal policies. An Anzac currency would be similarly flawed.