WELLINGTON, New Zealand – They tussle over cricket, rugby, movie stars and even a fluffy meringue dessert they call Pavlova, which both countries claim as their own.
Now the rivalry between New Zealand and Australia extends to a new arena — their currencies.
The kiwi, as the New Zealand dollar is called, is poised to surpass the Aussie dollar in value for the first time since the currencies were freely traded on international markets in the early 1980s. It was trading above 99 Aussie cents Wednesday and has been flirting with parity since last week.
Currency traders were predicting the kiwi would break above 1 Aussie dollar Thursday or soon thereafter.
China’s slowing growth is playing a role in this reversal, as are higher New Zealand interest rates. Weaker Chinese demand for Australia’s iron ore is depressing iron prices and the Aussie dollar relative to other currencies.
In broad terms, the change indicates that New Zealand’s economy is outperforming its Australian counterpart — something many New Zealanders are eager to celebrate, especially after losing the Cricket World Cup final to Australia last month.
“Our dollar is more than a currency,” wrote broadcaster Mike Hosking in an online opinion piece. “It’s an accumulation of what we’ve built, of what we offer the world, of how the world sees us. It’s our fiscal calling card, and at buck for buck it’s a platinum card with no limit, accepted wherever we go.”
Indeed New Zealand’s economy has been growing faster than Australia’s and its unemployment rate is lower, factors which have helped halt an exodus of New Zealanders flocking to Australia for better job opportunities.
Australians aren’t so happy.
“As Australia grapples with sinking commodity prices, sluggish consumer spending, lacklustre business investment, and an unstable political environment, New Zealand can boast of almost boom-time conditions,” Mark Mulligan at The Sydney Morning Herald newspaper wrote in a piece titled “Currency World Cup.”
Still, Australia has outperformed its neighbour over the long run. Unlike New Zealand, Australia managed to avoid a recession after the 2008 global financial crisis and continues to offer higher wages and better living standards than most countries, including New Zealand.
Australia has 24 million residents, five times as many as New Zealand, and often overshadows its neighbour in sports, business and international affairs.
Australia first floated its currency in 1983 and New Zealand the following year. Prior to that, the currencies were pegged against other currencies or gold, which sometimes allowed the kiwi to climb higher than the Aussie.
Since being freely floated, the Aussie has been worth significantly more than the kiwi until recently. The New Zealand dollar bought just 82 Aussie cents two years ago.
Economists say that when it comes to currencies, for every winner there is also a loser, depending on which side of the trading ledger you’re on.
The stronger kiwi means New Zealanders can enjoy cheaper imports and holidays in Australia, but it hurts New Zealand exporters and tourism operators who rely on the Australian market, said Shamubeel Eaqub, a principal economist at the New Zealand Institute of Economic Research.
And he said he believes New Zealand’s central bank has been forced to keep interest rates higher than in most developed nations in part to try and tame skyrocketing Auckland house prices, which have outstripped income growth and which some people worry is creating a bubble.
For now, many New Zealanders are eager to claim a victory in an ongoing rivalry that includes actor Russell Crowe, who was born in New Zealand but identifies as Australian, and the Rugby World Cup, which both countries have won twice.