Dual trans-Tasman currency 'unlikely': Key

Photo / APN

MELBOURNE - A shared currency between Australia and New Zealand has merit but is unlikely to eventuate, Prime Minister John Key says.

Speaking to a business luncheon in Melbourne today, Mr Key said adopting the Australian dollar would mean New Zealand forfeiting control of its monetary policy.

"My view is it is unlikely that it will happen, but it's not an idea without some merit," he told delegates at a Committee for Economic Development Australia function.

"The reason I don't think it would happen is not actually because of parochial, political reasons.

"I think it's because then again you have to abandon, from New Zealand's perspective, control of monetary policy."

Mr Key said New Zealand needed to retain its fiscal independence in case of an economic catastrophe, such as an outbreak of foot and mouth disease.

Only then could there be an enormous correction in currency to try to offset "economic carnage", he said.

"As an example, you've seen in Ireland at the moment the challenges that they're having where they're part of the European Union, the currency's the Euro and they really can't get the currency depreciation that they need to kick-start their economy."

Mr Key will meet with Australian Prime Minister Kevin Rudd on Thursday as part of a five-day tour.

He has flagged an announcement on lifting the investment threshold between the two countries and on simplifying border crossings for Australian and NZ nationals travelling across the Tasman.

However, this would not involve flights between domestic terminals because about one third of trans-Tasman passengers were not citizens of either country, he said.

Mr Key said climate change was also on the agenda.

It didn't make sense for Australia and NZ to have different policies and it was possible that a carbon market could trade freely between the two countries.

Mr Key is due to address the National Press Club in Canberra on Thursday, and attend a joint cabinet meeting on Friday.

The prime minister will then meet with Governor-General Quentin Bryce on Saturday, before attending the Bledisloe Cup rugby clash between Australia and New Zealand in Sydney on Saturday night.

- AAP