Kōrero: Balance of payments

On 2 March 1985 the minister of finance, Roger Douglas, announced that New Zealand would no longer control the international value of the New Zealand dollar, but allow it to float so that the market set its value against other currencies. The hope was that floating the currency would automatically correct balance of payments crises. When the current account was in serious deficit, the value of the New Zealand dollar would decline. This would increase the price of imports and therefore should reduce demand. It would also make exports cheaper and so more desirable overseas.