NZD vs AUD

Tony Alexander from BNZ writes:

Against the Australian currency the NZD has risen firmly in recent weeks and now sits at its highest level since October 2009. This movement upward from 80 cents a month ago is based upon a number of things. …

Third, the fiscal track in NZ is surprising on the positive side with revenue inflows running ahead of expectations this year. In contrast in Australia the Treasurer Wayne Swan has had to make a very embarrassing climb-down from his position that fiscal surplus would be achieved in 2013/14 no matter what. Now he speaks in terms of a surplus not appearing for many years. Commentators are noting that a Federal Labour government in Australia has not produced a surplus since 1989, there is growing criticism of the never-ending spending promises being made, and this week Standard and Poors warned that they could cut Australia’s rating in five years’ time.

That is a fascinating statistic. No surplus since 1989.

Fourth, Australia’s currency is more strongly assessed as being tied to growth prospects in China than the NZD.

Fifth, as China grows the expectation is that NZ will benefit more than Australia from here on out because of strong food demand compared with past strong demand for coal and iron ore.

Hopefully the demand will hold up. As unemployment in Spain hits 27%, Europe is going to remain a basket case for some time.