The Reserve Bank says a shared currency for New Zealand and Australia could boost efficiency and stimulate trade and investment between the two countries.
The comments are in a submission to the productivity commissions of both countries, as part of an inquiry into strengthening trans-Tasman economic relations.
In its submission, the Reserve Bank says a single currency may produce efficiency gains such as reduced exchange rate uncertainty and currency conversion costs.
It says a currency union could also expose domestic producers to more competition, thereby increasing productivity.
But it warns strong safeguards would be needed to avoid the kind of economic problems faced by the European Union.
The bank also warns that the loss of its own monetary policy would expose New Zealand to the possibility of increased inflation.
