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NZD/AUD is currently trading near the 0.93 level. However, economists at Westpac expect the pair to slide below the 0.90 mark – not due to New Zealand dollar weakness, but because they see relatively more upside for the Australian dollar.

Australia is better positioned

“We expect the NZD/AUD exchange rate to drop below 90 cents next year.”  

“Australia’s economic recovery was initially slower than New Zealand’s, due to a more prolonged period of covid lockdowns, but it is now gaining substantial momentum. The closure of international borders has proven to be more of a net benefit to domestic spending in Australia, and policymakers across the ditch appear more inclined to let their housing market continue to run hot.”  

“Both economies will benefit from stronger export commodity prices, fed by the rapid rebound in GDP growth and continued increases in demand from Asia. While commodity prices will eventually decline from their highs, Australia is better positioned to deliver an increase in export volumes as well. New Zealand’s capacity to increase export volumes is constrained in some respects.”