Inside Money: Parity pooper - why transtasman dollar equality is a downer

New Zealand remains dependent on Australia doing well and the currency convergence is a sign of the Australian economy in the doldrums. Photo / Thinkstock

When Don Brash et al penned the doom-laden 2025 Taskforce report 'Answering the $64,000 question: closing the income gap with Australia' in November 2009, every New Zealand dollar bought about 78 Australian cents in the wholesale markets.

Those were the days.

Just six years later the Brash-beater, John Key, is touting the New Zealand dollar's close flirtation with transtasman currency equality as a "point of celebration".

I won't be attending any 'parity parties'. The prospect of a dollar-for-dollar Aus/NZ exchange rate is unalloyed bad news for me - and for anyone else who sells stuff (words, in my case) to Australians.

And New Zealanders in general shouldn't be too quick to pop the champagne corks as parity looms. The currency convergence may partly be, as Key put it, a sign "our economy is doing well" - but it's more about an Australian economy in the doldrums.

As Brash notes in his 2009 report, New Zealand remains dependent on Australia doing well.

"There would be nothing remotely attractive about having closed the gap to Australia [by its economy declining] - as our largest trading partner and largest source of inward foreign investment, Australia's success matters greatly to us," the 2025 report says.

Although it's not stated in the report, Australia is also an important market for exporting New Zealand unemployment, which declined in the post-GFC years as many Kiwis headed off for high-paying jobs digging in our neighbour's iron-rich dirt.

That worm is turning.

According to the latest Statistics NZ migration figures, the net loss of 2,600 people to Australia in the 12 months to February 2015 is the smallest "since the March 1992 year (2,300)".

The same stat reached "15,000 in the February 2014 year and 36,700 in the February 2013 year".

"The highest-ever [monthly] net loss to Australia (4,300) was in February 2001, just before an immigration policy change that restricted access to welfare benefits for New Zealand citizens arriving after that date," Statistics NZ says.

In the December 2014 quarter, New Zealand's unemployment rate ticked up to 5.7 per cent compared to 5.4 per cent three months previously.

Interestingly, Bill Rosenberg, NZ Council of Trade Unions (CTU), notes in a recent newsletter that despite the apparent reversal of fortunes between Australia and NZ, the transtasman income gap "is not closing, and in fact is still rising".

"Various measures of the hourly wage, adjusted for its purchasing power on either side of the Tasman, show a similar pattern: the gap fell between about 2005 and 2008 and then began to rise again," Rosenberg writes. "It has re-opened to be as bad as it ever was."

Unfortunately, we'll never know if the Brash Taskforce had that gap problem nailed.

Just quietly, in 2011, with NZ's dairy boom underway, the government wound the 2025 Taskforce up "and as a result [it did] not prepare a third and final report".