How record low interest rates will make travelling to New Zealand more expensive


The tricky tactics being used to make overseas holidays more expensive as Australians are allowed to travel to New Zealand

  • Australian dollar has failed to climb above US80c despite iron ore prices
  • Reserve Bank of Australia admitted its interest rate policy suppressing currency
  • The currency has recovered since March 2020 but could it be even higher
  • A surge in the iron ore price usually coincides with a strong increase in the $A 

Australians wanting to travel overseas are set to be paying a lot more with a travel bubble now open with New Zealand.

The Australian dollar has recovered dramatically since March 2020 when it fell to a low of just US55.71c.

As the economy has rebounded, the local currency in January touched the US78c mark and was revisiting those levels on Tuesday.

The currency, however, has failed to surpass the key US80c mark since February 2018 despite a recent resurgence in iron ore prices, which usually coincide with a stronger Australian dollar.

Australians wanting to travel overseas are set to be paying a lot more with a travel bubble now open with New Zealand. Pictured are loved one embracing in Wellington following the start of the trans-Tasman travel bubble

Australians wanting to travel overseas are set to be paying a lot more with a travel bubble now open with New Zealand. Pictured are loved one embracing in Wellington following the start of the trans-Tasman travel bubble

The Reserve Bank of Australia on Tuesday admitted its promise to keep interest rates on hold at a record-low of 0.1 per cent, until at least 2024, was suppressing the recovery in the currency.

‘The bank’s monetary policy settings had continued to support the economy by keeping financing costs very low, contributing to a lower exchange rate than otherwise,’ it said.

Late last year, the Westpac bank forecast the Australian dollar would hit the US80c mark in 2021 but that is yet to occur.

During the past year, the spot price of iron ore, the commodity used to make steel, has more than doubled from US$63 per metric tonne to US$175.

The Reserve Bank of Australia on Tuesday admitted its promise to keep interest rates on hold at a record-low of 0.1 per cent, until at least 2024, was suppressing the recovery in the currency. Pictured are cabin crew at Sydney International Airport

The Reserve Bank of Australia on Tuesday admitted its promise to keep interest rates on hold at a record-low of 0.1 per cent, until at least 2024, was suppressing the recovery in the currency. Pictured are cabin crew at Sydney International Airport

On Monday, the trans-Tasman travel bubble opened, allowing Australians to travel quarantine-free to and from New Zealand.

A stronger Australian dollar would go even further in New Zealand with one local unit buying NZ$1.08.  

Australians are technically banned from travelling to another country beyond the bubble, but New Zealand authorities would be powerless to stop them.

Australian Border Force acknowledged this point in early April. 

‘New Zealand does not prevent Australian citizens leaving New Zealand and travelling onwards overseas,’ it said.

The currency, however, has failed to surpass the key 80 US cent mark since February 2018 despite a resurgence in iron ore prices, which usually coincide with a stronger Australian dollar. Pictured is Prime Minister Scott Morrison in Karratha, Western Australia, with Fortescue Metals chief Andrew Forrest

The currency, however, has failed to surpass the key 80 US cent mark since February 2018 despite a resurgence in iron ore prices, which usually coincide with a stronger Australian dollar. Pictured is Prime Minister Scott Morrison in Karratha, Western Australia, with Fortescue Metals chief Andrew Forrest

Australians travelling beyond New Zealand face 14 days in quarantine if they manage to afford a flight home with about 35,000 Australian citizens stranded abroad.

‘Anyone arriving into Australia or New Zealand from any other country must enter into quarantine or mandatory isolation as directed by the relevant government departments and health authorities,’ Border Force said.

Those travelling to the US most likely will be paying more for an overseas holiday thanks to Reserve Bank of Australia monetary policy.

That is before the costs of mandatory hotel quarantine and a flight back to Australia are factored in. 

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