Political sketch
A self governing territory in association with New Zealand.
Niue was settled around 900 by Samoans. The English captain James Cook landed on Niue in 1774 and named it Savage Island because of the reception he received. Missionaries arriving in the 1830s, and starting in 1852 the islanders were converted to Christianity. In 1900 the United Kingdom annexed Niue. New Zealand annexed the island in 1901 as part of the Cook Islands, but in 1904 it was separated and given its own resident commissioner and island council. The first legislature was elected in 1960, and in 1966 a local leader of government was installed. In 1974 Niue's inhabitants voted for a new constitution, choosing self-government in association with New Zealand. The government is democratic. New Zealand provides defense, looks after foreign affairs, and allows Niueans to be New Zealand citizens. The island's economy is based mainly on agriculture.
Wars since 1500
None.
Convertibility
As a territory of New Zealand, exchange controls in effect in New Zealand applied in Niue.
The sterling area:
On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914 gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925 the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.
The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973 the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The United Kingdom abolished exchange controls on 24 October 1979, ending the sterling area.
New Zealand alone:
On 5 August 1914, shortly after the First World War began, an amendment to the Banking Act empowered the Governor-General in Council (that is, the cabinet), to issue a proclamation declaring any banknotes to be forced tender. While any such proclamation was in effect, coined gold could not be exported without the consent of the minister of finance. From 5 August 1914-5 November 1919, it was also prohibited to export uncoined gold without his consent. Immediately after the amendment passed, the government issued a proclamation making bank notes forced tender from 6 August-6 September 1914. The government extended the proclamation from time to time (New Zealand official yearbook 1937: 572). New Zealand in effect resumed the gold standard when the United Kingdom resumed on 13 May 1925.
On 20 January 1933, the exchange rate was depreciated. Exporters received the new rate, which was more favorable to them, while exporters of capital continued to receive the old rate (New Zealand official yearbook 1937: 575). The dual rate ended on 1 August 1934. On 5 December 1938, New Zealand's government authorized the central bank not to convert notes into pounds sterling at the official exchange rate, thereby introducing exchange controls that became effective on 7 December 1938. In July 1939, the central bank introduced regulations that deferred remittances on all overseas funds except those for the national government and payment of foreign debt owed by local governments. (Local governments, as elsewhere in British colonies and former colonies, often issued securities in London.) Before July 1939, a system of permits for foreign exchange existed, but they did not limit the period during which remittances could be made. The Finance Emergency Regulations, April 1940, eliminated the free exchange market and forbade transactions at other than official rates. They were replaced by the Finance Emergency Regulations (No. 2), June 1940. Amendments introduced on 9 March 1950 greatly loosened controls as they applied to the sterling area.
New Zealand left the sterling area on 23 June 1972. It removed most exchange controls on 24 December 1984, and removed all remaining controls on 1 February 1990 (New Zealand official yearbook 1985: 790; IMF ARER 1991: 352).
Other
Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): None.
Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): None.
Frankel and Rose (1996) list of currency crashes: Country not listed.
No exchange rate data in Reinhart and Rogoff (2003).
References
Primary sources:
--Laws and decrees:
Niue. Gazette. 1978/1980-1984?. Niue Island Gazette. Niue: Department of Justice, Lands and Survey
--Publications of monetary authorities:
Reserve Bank of New Zealand. Annual report. 1935-present. Report of the First Ordinary General Meeting (1935); Annual Report of the Board of Directors and Statement of Accounts for the year ended 31st March (1936, 1938, and 1952-1953); Report of the Board of Directors for the year ended 31st March (1937 and 1939-1952); Annual Report of the Board of Directors and Statement of Accounts for the year ended 31st March (1954-1964; this is from the title page; the cover says simply Annual Report); Annual Report of the Directors and Statement of Accounts for the year ended 31st March (1965-1989); Annual Report and Financial Statements for the year ended 31st March (1990-present). Wellington: Reserve Bank of New Zealand.
Reserve Bank of New Zealand. Bulletin. 1938-present. Statistical Summary (1938-1950); Bulletin (1951-present). Wellington: Reserve Bank of New Zealand.
--Web site of the current monetary authority (viewed January 2005):
<http://www.rbnz.govt.nz>
--Other publications or Web sites:
New Zealand. Report on Niue. 1906?-1974? Cook Islands Department, Cook and Other Islands (1906?-1933); Department of External Affairs, Niue Island Administration (1934-1941); not published 1942-1944; Department of Island Territories, Cook Islands (1944/1945-1951/1952);, Department of Island Territories, Reports on the Cook, Niue, and Tokelau Islands (1952/1953-1964/1965); Department of Island Territories, Reports on Niue and the Tokelau Islands (1966/1967); Maori and Island Affairs Department, Reports on Niue and the Tokelau Islands (1967/1968); Department of Maori and Island Affairs, Reports on Niue and the Tokelau Islands (1968/1969-1973/1974). Wellington: Government Printer.
Main secondary sources:
IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.) (No direct information on Niue, but some information can be inferred from data on New Zealand.)
Monetary authorities: Niue
| Dates | Type | Name | Source | Remarks |
| 1901?
-present (2005) |
dollarization (see Remarks) | pound sterling (issued by central bank Bank of England [headquarters London, England]) alongside New Zealand pound / dollar from 10 July 1967 (issued by multiple free banks / by central bank Reserve Bank of New Zealand [headquarters Wellington, New Zealand] from 1 August 1934) | starting date inferred from general histories; no specific information on monetary history | Became a territory of New Zealand. No clear distinction existed between British and New Zealand currency until 21 December 1929, when the New Zealand pound began to trade a more than a 2% discount to the pound sterling. New Zealand did not have its own coins until November 1933; before that it used British and Australian coins. The Cook Islands also used those coins. The first bank was Westpac Bank (headquarters Sydney, Australia), in Alofi, in 1988. No second bank has ever been opened. Niue issued its first coins in 1987. |
Exchange rate arrangements: Niue
| Dates | Official arrangement | Source | Unofficial arrangement, if different | Remarks |
| 1880s?
-1901? |
fixed; used pound sterling | inferred from Great Britain, report on the Cook Islands, 1899: 6 | Niue became a British protectorate in 1900. I have been unable to find early documents specifically pertaining to Niue, so I have inferred that conditions were like those in the Cook Islands. | |
| 1901?
-9 July 1967 |
fixed; used pound sterling and later New Zealand pound | starting date inferred from general histories; no specific information on monetary history | See the tables for the United Kingdom and New Zealand on parallel market data for their currencies. | Niue became a territory of New Zealand in 1901. No clear distinction existed between British and New Zealand currency until 21 December 1929, when the New Zealand pound began to trade a more than a 2% discount to the pound sterling. New Zealand did not have its own coins until November 1933; before that it used British and Australian coins. The Cook Islands also used those coins. |
| 10 July 1967
-present (2005) |
fixed; uses New Zealand dollar | New Zealand, Decimal Currency Act, 1964, cited in Reserve Bank of New Zealand annual report, 31 March 1965: 31; Reserve Bank of New Zealand annual report, 31 March 1968: 36 | The decimalized New Zealand dollar replaced the New Zealand pound at $2 = £1.The new currency was called the dollar because its value was closer to that of the US dollar than the pound sterling. Australia had replaced its pound with the Australian dollar on 14 February 1966. |