Political sketch
Independent from the United Kingdom on 26 September 1907.
Polynesian occupation of New Zealand dates to at least A.D. 1000 and probably two or three centuries earlier. Abel Janszoon Tasman, a Dutch sailor, commanded an expedition that sighted the coast of Westland in December 1642. New Zealand was named after the Dutch province of Zeeland. His attempt to land on the South Island provoked a clash with the Maori, however. In 1769 and 1770 the English captain James Cook circumnavigated and charted the two main islands. Australian companies set up small whaling settlements around the coasts of both islands. From 1839 to 1841 New Zealand was part of the British Australian colony of New South Wales. On 6 February 1840, under the Treaty of Waitangi, the Maori ceded the sovereignty of New Zealand to the United Kingdom in exchange for protection and guaranteed possession of their lands. Intermittent fighting with the Maori went on, however, until the colonists finally subdued them in 1847. In 1860 troops were used to dislodge Maori from land sold under questionable circumstances; war broke out and continued for most of the decade. Eventually British forces, militia, and Maori allied to the government defeated the tribes opposed to selling land.
The discovery of gold in the mid 1800s brought prosperity and more European settlers. In the early 1880s the development of refrigerated ships made it possible for farmers to ship butter, cheese, and meat. New Zealand became a prosperous agricultural exporter. On 26 September 1907 New Zealand became a British dominion, making it in practice independent. Official independence came in 1931 with the British Statute of Westminster, which New Zealand accepted in 1947. New Zealand is a democracy. During the First and Second World Wars, New Zealand supported the United Kingdom. After a long period of increasing government involvement in the economy, in 1984 New Zealand began economic reforms that greatly reduced the role of government and attracted worldwide attention. Agricultural and forest products are the major exports.
Wars since 1500
Bay of Islands War (First Maori War), 1844-1847 (British versus Maoris); First Taranaki War, 1860-1861 (British versus Maoris); Second Taranaki War, 1863-1864 (British versus Maoris); Third Taranaki War (1864-1872) (British versus Maoris) (the three Taranaki wars are sometimes collectively called the Second Maori War); First World War, 1914-1918 (United Kingdom, British Empire, France, United States, Japan, and their allies against Germany and its allies ); Second World War in the Pacific, 1942-1945 (Japan against United Kingdom, United States, China, Australia, New Zealand, Netherlands, and allies).
Convertibility
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, just 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.
In 1931, following the devaluation of the currency to New Zealand £1.10 = UK£1, the government gave banks a monopoly of business for foreign-exchange trade. The arrangement, known as the exchange pool, ceased after the government obtained a large loan in London in May 1932 (Chappell 1961: 314-15).
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): nonsystemic problems 1987-1990, with fiscal costs of about 1% of GDP.
Frankel and Rose (1996) list of currency crashes: Country not listed.
References
Primary sources:
--Laws and decrees:
Great Britain (United Kingdom). Gazette. 1665-present. Oxford Gazette (1996-1666); London Gazette (1666-present). Oxford (1665-1666); London (1666-present): His/Her Majesty's Stationery Office from 1903. Online at <http://www.gazettes.online.co.uk>; as of September 2005, gazettes since 1900 are available.
New Zealand. Gazette. 1856-present (weekly). New Zealand Gazette (Maori title Te Kahiti o Aotearoa). Auckland, later Wellington: Government Printer. Recent issues are available at <http://www.gazette.govt.nz/diawebsite.nsf/wpg_URL/Services-New-Zealand-Gazette-Index?OpenDocument>.
--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. Official yearbook. 1893-present. New Zealand Official Year-Book (from 1961 the last word was spelled Yearbook). Wellington: Government Printer.
Main secondary sources:
Bedford, H. D. 1915. "History and Practice of Banking in New Zealand." Unpublished D. Litt. thesis, Dunedin University, New Zealand. (I have not seen this.)
Butlin, S[ydney] J[ames]. 1961. Australia and New Zealand Bank. London and Croydon, Victoria, Australia: Longmans, Green and Company.
Chalmers, [Sir] Robert. 1893. A History of Currency in the British Colonies. London: Eyre and Spottiswoode for Her Majesty's Stationery Office.
Chappell, N. M. 1961. New Zealand Banker's Hundred: A History of the Bank of New Zealand, 1861-1961. Wellington: Bank of New Zealand.
Colgate, P., and D. K. Sheppard. 1990. "A History of the Bank of New Zealand 1862-1982. Part I: 1862-1934." Edited by K. Guerin and G[ary] R[ichard] Hawke. Discussion Paper No. 7, June. Victoria University of Wellington Money and Finance Association.
Griffiin, R[obert] H[enry]. 1987. Bank of New Zealand Banknotes 1861-1934: Produced to Celebrate the 125th Anniversary of the Bank. Wellington: Bank of New Zealand. (I have not seen this.)
Hawke, G[ary] R[ichard]. 1973. Between Governments and Banks: A History of the Reserve Bank of New Zealand. Wellington: A. R. Shearer, Government Printer.
Hawke, Gary [Richard]. 1997. The Thoroughbred Among Banks in New Zealand: 1872-1947, the Early Years. Wellington: National Bank of New Zealand. (A history of the National Bank of New Zealand.)
Hargreaves, R. P. 1972. From Beads to Bank Notes. Dunedin, New Zealand: John McIndoe.
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.)
Matthews, Ken. 2003. "The Legal History of Money in New Zealand." Reserve Bank of New Zealand Bulletin, v. 66, no. 1: 40-49, <http://www.rbnz.govt.nz/research/bulletin/2002_2006/2003mar66_1matthews.pdf>, viewed 27 April 2005.
RR. Reinhart, Carmen M., and Kenneth S. Rogoff. 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation." Quarterly Journal of Economics, v. 99, no. 1, February: 1-48. Earlier drafts and underlying data are available on Reinhart's Web site, <http://www.puaf.umd.edu/faculty/papers/reinhart/reinhart.htm>.
Sinclair, Keith, and W. F. Mandle. 1961. Open Account: A History of the Bank of New South Wales in New Zealand, 1861-1961. Wellington: Whitcombe and Tombs.
Standish, Michael Wordsworth. 1966. "FitzRoy, Robert." In A. H. McLintock, editor, An Encyclopedia of New Zealand, 3 v. Wellington: Government Printer. Online version <http://www.teara.govt.nz/1966/F/FitzroyRobert/FitzroyRobert/en>, viewed 27 April 2005.
Monetary authorities: New Zealand
| Dates | Type | Name | Source | Remarks |
| 7 March 1840
-April 1844 |
free banking | multiple (2) note-issuing banks | United Kingdom, deed of settlement of Union Bank of Australia, 7 July 1839; apparently also a deed of settlement for the New Zealand Banking Company, though information is scarce | The first bank was the Union Bank of Australia (headquarters London, England), which opened a branch in Petone (Port Nicholson, near present-day Wellington). It was a joint-stock bank having unlimited shareholder liability, and was associated with the New Zealand Company, a colonization society based in London. The second bank was the New Zealand Banking Company (headquarters Kororareka, and later Auckland, New Zealand), which opened a branch at Kororareka (Bay of Islands) in September 1840 and moved it to Auckland in 1841. That bank was liquidated in 1845. |
| April 1844
-November 1845 |
government issue alongside free banking | Government of New Zealand (headquarters Auckland, New Zealand) alongside multiple (2) note-issuing banks | New Zealand, Debentures Ordinance, 7 Victoria No. 4, 1844, cited in Matthews (2003: 42) | Governor Robert FitzRoy issued low-denomination government bonds that circulated as currency. The government was short of revenue and issuing the bonds was a way for it to pay its bills. The bonds never achieved wide circulation because they were poorly printed (hence at greater risk of forgery than banknotes) and of doubtful legality. |
| November 1845
-2 June 1850 |
free banking | multiple (2) note-issuing banks | Standish (1966) | The British government disallowed (nulllified) the ordinance permitting issuance of the bonds and the government retired them from circulation. British policy of the time was not to allow colonial governments to issue currency unless they first received express permission from London. |
| 3 June 1850
-30 September? 1856 |
currency board | Colonial Bank of Issue (headquarters Auckland, New Zealand) | New Zealand, Paper Currency Act, 11 Vict. No. 16, 16 October 1847; governor's proclamation of 12 April 1850; both cited in Chalmers (1893: 288) | New Zealand established the first orthodox currency board. The governor at the time was a follower of the British Currency School of monetary thinkers, which originated the currency board concept. The government required the banks to withdraw their notes from circulation by October 1852. (Chalmers 1893: 289 remarks that in Auckland the public generally preferred gold coins to notes, possibly from antagonism toward the government for displacing bank-issued notes; in Wellington, where the currency board also had an office, the public was more willing to use notes.) |
| 1 October? 1856
-31 July 1934 |
free banking | multiple (17) note-issuing banks | New Zealand, Bank Paper Currency Act of 1856, cited in Chalmers (1893: 290) | Allowed banks to issue notes and retired the currency board note issue to give greater encouragement to the spread of commercial banks. Under the Bank-note Issue Act of 1893, amended in 1894 and 1895, certain banknotes were for a short time made forced tender in New Zealand (New Zealand official yearbook 1937: 572). The act was passed after a run on the Auckland Savings Bank in September 1893; it was used in 1895 to aid the privately owned Bank of New Zealand (Matthews 2003: 46). New Zealand issued its first coins in late November 1933 under provisions of the Finance Act, No. 2 of 1932-1933 (New Zealand official yearbook 1937: 569-70). Before that it used British and Australian coins, gold coins struck at Sydney being given legal tender by United Kingdom, proclamation of 14 January 1871, promulgated in New Zealand on 21 June 1871 (Chalmers 1893: 286). By 1931, an estimated 40% of coins in circulation were Australian nongold coins that had no legal tender status (Hargreaves 1972: 141). |
| 1 August 1934
-present (2005) |
central bank | Reserve Bank of New Zealand (headquarters Wellington, New Zealand) | New Zealand, Reserve Bank of New Zealand Act, 1933, cited in Reserve Bank of New Zealand annual report, 31 March 1935: 8, 11; Reserve Bank Amendment Act, 5 December? 1936, cited in Reserve Bank of New Zealand annual report, 31 March 1936: 7; New Zealand official yearbook 1937: 573; Reserve Bank of New Zealand Act 1989, cited in Reserve Bank of New Zealand annual report, 31 March 1990: 5 | The depressed worldwide economic conditions of the 1930s helped impel New Zealand to create a central bank; many people suspected the commercial banks of having created or at least worsened the depression in New Zealand. The central bank at first had private stockholders, but was nationalized by the 1936 act, effective perhaps on 1 April 1936. On 1 August 1936, commercial banks were required to give to the central bank reserves sufficient to back their remaining notes in circulation. In 1945 the government obtained sole control of the Bank of New Zealand, a large commercial bank. The Reserve Bank of New Zealand Amendment Act, 1960, which became operative on 28 October 1960, transferred final authority over the exchange rate from the central bank to the Minister of Finance, subject to consultation with the central bank (Reserve Bank of New Zealand annual report, 31 March 1961: 31). New Zealand joined the IMF on 31 August 1961. The Reserve Bank of New Zealand Act 1989, which came into effect on 1 February 1990, required the governor of the central bank and the minister of finance |
Exchange rate arrangements: New Zealand
| Dates | Official arrangement | Source | Unofficial arrangement, if different | Remarks |
| 1839
-April 1944 |
fixed; local £1 = UK£1; also Spanish $1 = UK 4 shillings 4 pence (Spanish $60 = UK£13) | United Kingdom, Order in Council and Proclamation of 23 March 1825; New South Wales, government notice printed 5 May 1825; New South Wales, General Order of 31 December 1825; Currency Act, 7 George IV, No. 3, 12 July 1826; New South Wales legislation cited in Butlin (1968 [1953]: (1968 [1953]: 164, 166) | These were the rating applying under the laws of New South Wales, of which New Zealand was originally a part. Chalmers (1893: 286) remarks that "Sterling was assumed to be the currency of the Colony in its earliest days." New Zealand, Paper Currency Act, 11 Vict. No. 16, 16 October 1847, declared "cash" to mean current gold and silver coin of the realm (meaning the coins specified by British proclamations for the colonies). New Zealand used British and Australian coins and had no local coins until 1933. | |
| April 1844
-November 1845 |
pegged; local £1 = UK£1; also Spanish $1 = UK 4 shillings 4 pence (Spanish $60 = UK£13) | New Zealand, Debentures Ordinance, 7 Victoria No. 4, 1844, cited in Matthews (2003: 42) | Governor Robert FitzRoy issued low-denomination government bonds that circulated as currency. The exchange rate therefore changed from fixed to pegged. | |
| November 1845
27 May? 1858 |
fixed; local £1 = UK£1; also Spanish $1 = UK 4 shillings 4 pence (Spanish $60 = UK£13) | Standish (1966) | The British government disallowed (nulllified) the ordinance permitting issuance of the bonds and the government retired them from circulation. The exchange rate reverted to a fixed rate. | |
| 28 May? 1858
-5 August 1914 |
fixed; local £1 = UK£1 (= 7.32238g gold) | New Zealand, 21 and 22 Victoria, No. 2, 28 May 1858, cited in Chalmers (1893: 286) | This law retroactively established that the laws of England existing on 14 January 1840 were, so far as applicable, the laws of New Zealand from that day forward. The applicable British law concerning the monetary standard was therefore 56 George III, cap. 68, 1816. | |
| 6 August 1914
-20 December 1929 |
fixed; local £1 = UK£1 | New Zealand, amendment to the Banking Act, 5 August 1914, cited in New Zealand official yearbook 1937: 572 | Suspended the gold standard after the outbreak of the First World War. When the United Kingdom returned to the gold standard on 13 May 1925, the New Zealand pound became indirectly convertible into gold. | |
| 21 December 1929
-28 January 1931 |
managed float | New Zealand official yearbook 1937: 574 | Depreciating crawling peg to pound sterling. | The spot selling rates depreciated by more than 2% from parity, in a reaction to the start of a worldwide depression. The New Zealand pound continued to depreciate thereafter. Exchange rates in this period were established by the Associated Banks of New Zealand, a trade association. |
| 29 January 1931
-19 January 1933 |
fixed; New Zealand £1.10 = UK£1 | New Zealand official yearbook 1937: 574 | The exchange rate stabilized at this level. | |
| 20 January 1933
-31 July 1934 |
pegged, dual rate; New Zealand £1.25 = UK£1 | New Zealand, government decision of mid January 1933; Bank Indemnity (Exchange) Act, 1 March 1933; both cited with other material in New Zealand official yearbook 1937: 574-6 | The government decided to depreciate the exchange rate further in midst of a depression. Exporters received the new rate, which was more favorable to them, while exporters of capital continued to receive the old rate of New Zealand £1.10 = UK£1. The Bank Indemnity (Exchange) Act established the new exchange rate in statute law. | |
| 1 August 1934
-6 December 1938 |
pegged; New Zealand £1.25 = UK£1 | Reserve Bank of New Zealand, announcement of 19 July 1934, cited in Reserve Bank of New Zealand annual report, 31 March 1935: 17; Finance Act, 1934, cited in New Zealand official yearbook 1937: 576 | The government announced that the Reserve Bank of New Zealand, which was to begin operations on 1 August 1934, would maintain a spread of New Zealand £1.24-1.25 = UK£1. The rate listed in the second column was the selling rate. The dual rate ended. The Finance Act provided that the central bank could suspend the exchange rate with the approval of the minister of finance (New Zealand official yearbook 1937: 573). | |
| 7 December 1938
-19 August 1948 |
pegged; New Zealand £1.25 = UK£1 (buying rate) | New Zealand, government announcement of 5 December 1938?, pursuant to Reserve Bank of New Zealand Amendment Act, 1936, cited in Reserve Bank of New Zealand annual report, 31 March 1939: 12 | RR: Parallel market premium was 4% right after Second World War. Monthly parallel market data begin in January 1948. Parallel market premium against the US dollar is below that of the pound sterling, the anchor currency. | The government relieved the central bank of the obligation to redeem central bank notes in pounds sterling. In practice, though, the market rate did not change. |
| 20 August 1948
-26 October 1961 |
pegged; New Zealand £1 = UK£1 (see Remarks) | Reserve Bank of New Zealand annual report, 31 March 1949: 9; Reserve Bank of New Zealand bulletin, November 1961: 148 | RR: Parallel market premium against the US dollar is close to or even below that of the pound sterling, the anchor currency, until October 1951, when it begins to be persistently higher, settling in to be typically 10-15 percentage points higher than the premium of the pound sterling. | Revalued to reattain parity with pound sterling, and resumed offering a selling rate. During the Second World War, New Zealand had accumulated large reserves in pounds sterling. Technically, the change took effect at 9 p.m. on 19 August 1948, but the next day was the first day it was in effect at the end of trading. The spread was New Zealand £1.00375-1.01 = UK£1, making the actual midrate New Zealand £1.006875. On 19 September 1949, New Zealand devalued along with the pound sterling against non-sterling currencies because New Zealand's trade at the time was mainly with countries belonging to the sterling area. Starting 19 August 1948, the central bank bought all locally produced gold at New Zealand £8 / 8 shillings / 6 pence (about New Zealand £8.417) per fine troy ounce. After the devaluation of 19 September 1949, it raised the price to New Zealand £12 / 4 shillings / 6 pence (New Zealand £12.225; this was approximately New Zealand £1 = 2.5871g gold) (Reserve Bank of New Zealand annual report, 31 March 1949: 9-10; 31 March 1950: 11). |
| 27 October 1961
-9 July 1967 |
pegged; New Zealand £1 = UK£1 = US$2.7809, or New Zealand £1 = 2.4713g gold (see Remarks) | New Zealand, Minister of Finance, announcement of 28 October 1961, cited in Reserve Bank of New Zealand bulletin, November 1961: 148; International Finance Agreements Act, 1961, cited in Reserve Bank of New Zealand bulletin, December 1961: 158 | RR:Parallel market premium falls from teens to mid single digits, then rises to persitently above 20% from August 1966, while the pound sterling's premium is near zero. | New Zealand registered a gold parity with the IMF. The gold parity corresponded to the midrate of New Zealand £1.006875 = UK£1 mentioned above. |
| 10 July 1967
-20 November 1967 |
pegged; New Zealand $2 = UK£1, or New Zealand $1 = US$1.39045 = 1.23565g gold | New Zealand, government announcement of August 1963, cited in Reserve Bank of New Zealand bulletin, June 1967: 75; 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 | RR: Parallel market premium in 20-40% range. | The decimalized New Zealand dollar replaced the New Zealand pound at New Zealand $2 = New Zealand £1. The transitional period for circulation of old currency alongside new currency ended on 31 May 1968. 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. |
| 21 November 1967
-23 August 1971 |
pegged; New Zealand $2.14295 = UK£1, or New Zealand $1 = US$1.12 = 0.99531g gold | New Zealand, prime minister's announcement of 21 November 1967, cited in Reserve Bank of New Zealand annual report, 31 March 1968: 34 | RR: Parallel market premium variable, but mostly in teens. | Devalued with the pound sterling, which had been devalued on 18 November 1967 (UK time), and maintained an exchange rate of New Zealand $1 = Australian $1, convenient because of New Zealand's trade with Australia. Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Banks that traded foreign exchange suspended them in all currencies except pounds sterling on 21 November 1968 and resumed on 26 November 1968, following the devaluation fo the pound sterling. Normal foreign-exchange dealings were suspended on 17 August 1971 and resumed on 24 August 1971, but in the interim the central bank provided facilities for banks to quote rates against the pound sterling. |
| 24 August 1971
-22 December 1971 |
pegged; New Zealand $2.14295 = UK£1, or New Zealand $1= 0.99531g gold (nominally) | IMF ARER (1972: 319) | RR: Parallel market premium in low single digits. | Ceased the peg to the US dollar. Foreign-exchange dealings were suspended on 20 December 1971 and resumed on 23 December 1971. |
| 23 December 1971
-13 February 1973 |
pegged; New Zealand $1 = US$1.216 = 0.99531g gold (nominally) | Reserve Bank of New Zealand annual report, 31 March 1972: 20; Reserve Bank of New Zealand bulletin, January-February 1972: 7 | RR: Parallel market premium rising from low single digits to teens. | Repegged to the US dollar, switched from the pound sterling to the US dollar as the intervention currency, ceased pegging to the pound sterling, and adopted wider margins after the US dollar was devalued against gold on 18 December 1971. |
| 14 February 1973
-8 July 1973 |
pegged; New Zealand $1 = US$1.35111 = 0.99531g gold (nominally) | Reserve Bank of New Zealand annual report, 31 March 1973: 18; IMF ARER (1974: 323) | RR: Parallel market premium mostly in teens. | Did not follow the devaluation of the US dollar against gold on 12 February 1973. The exchange rate spread the central bank quoted for the US dollar on 15 February 1973 was New Zealand $1 = US$1.3207-1.3337. |
| 9 July 1973
-31 March 1978 |
flexible basket; inoperative gold parity New Zealand $1 = 0.99531g gold (nominally) | New Zealand, Minister of Finance, announcement of 9 July 1973, cited in Reserve Bank of New Zealand annual report, 31 March 1974: 24; Reserve Bank of New Zealand annual report, 31 March 1977: 22; prime minister's statement of 10 August 1975, reprinted in Reserve Bank of New Zealand bulletin, August 1975: 226; Reserve Bank of New Zealand annual report, 31 March 1977: 20 | RR: Parallel market premium varies from 0-37%, but is zero at end of period. | Ceased to peg to the US dollar. New Zealand managed the exchange rate so as to maintain a stable effective exchange rate between the New Zealand dollar and the currencies of its major trading partners, in effect a basket. On 10 September 1973, New Zealand appreciated the New Zealand dollar by 10%, following a similar move by Australia the previous day. On 25 September 1974, New Zealand depreciated the New Zealand dollar by approximately 6.2% against the basket of currencies of its main trading partners. On 10 August 1975, the New Zealand dollar was depreciated by 15% against the US dollar; the basket remained the anchor. On 29 November 1976, after a large depreciation by Australia, New Zealand depreciated its currency from New Zealand $1 = US$0.9738 to New Zealand $1 = US$ 0.9063, although the depreciation against the basket was only 2.73%. On 19 December 1976,the currency was revalued to New Zealand $1 = US$0.9377, a revaluation of 2% against the basket. |
| 1 April 1978
-17 July 1984 |
flexible basket (IMF: not maintained within narrow margins, reclassified as managed float when the category began 1982) | International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment"); Reserve Bank of New Zealand annual report, 31 March 1979: 23; prime minister's announcement of 21 June 1979, cited in Reserve Bank of New Zealand bulletin, July 1979: 231; prime minister's announcement of 22 June 1982, reprinted in Reserve Bank of New Zealand bulletin, July 1982: 258; Reserve Bank of New Zealand annual report, 31 March 1983: 22; 31 March 1984: 25; 31 March 1985: 14; IMF ARER 1983: [page to come, on exchange rate classification as managed float]) | RR: Parallel market premium mostly near zero, with occasional spikes above 10%. | The system of gold par values officially ended by agreement of IMF members. The central bank closed the foreign-exchange market on 18 August 1978 for all currencies except the US dollar and allowed it reopen on 21 August 1978. On 1 February 1979, the central bank announced a measure to allow commercial banks greater flexibility in setting exchange rates for currencies against currencies other than the US dollar, the intervention currency. On 21 June 1979, the central bank devalued the currency 5% against the basket and announced that it would henceforth make small, regular (but not preannnounced) adjustments to the exchange rate, of less than 0.5%. It made adjustments on the basis of cost and price differentials. On 22 June 1982, the central bank announced that it would peg the effective (trade-weighted) exchange rate index of the currency pegged to an index level of 83.4, as part of an overall one-year freeze on wages and prices. On 8 March 1983, the central bank depreciated the currency by 8.3% against the basket, to the equivalent of New Zealand $1 = |
| 18 July 1984
-3 March 1985 |
managed float | New Zealand, prime minister-elect, announcement of 18 July 1984, cited in Reserve Bank of New Zealand annual report, 31 March 1985: 14 | RR: Parallel market premium near zero after July 1984, when it is 11%. | Devalued by 20% in terms of the trade-weighted basket and floated as part of wider policies of economic liberalization, including removing certain exchange controls. The main text and appendix of the IMF source disagree about whether New Zealand had a managed float or a basket (IMF ARER 1985: 360, 555). |
| 4 March 1985
-present (2005) |
clean float (IMF: independent float) | New Zealand, Minister of Finance, announcement of 2 March 1985, cited in Reserve Bank of New Zealand bulletin, March 1985: 132; IMF ARER (1986: [page on exchange rate classification]) | RR: Parallel market premium mostly near zero until data end in December 1998. Premiums of around 20% for the whole of 1998 seem strange, given that New Zealand had no capital controls, and I am inclined to ignore them. | Floated as a part of wider policies of economic liberalization. The central bank has not intervened in the foreign-exchange market to influence the excahnge rate; it has limited its activity to conducting foreign-exchange transactions related to the budgetary operations of the government. The central bank adopted an inflation target in 1989. |