The New Zealand dollar is overvalued against its Australian counterpart and is putting pressure on exporters, Finance Minister Bill English says.
The kiwi last week hit a 35-year high against the aussie, briefly buying more than A95 cents, and it remains above A94c this week.
Some commentators have speculated that the currencies could reach parity this year as the Reserve Bank of New Zealand increases the official cash rate (OCR).
English said today that the high exchange rate was a concern for the economy.
"It's an increasing headwind for those businesses that are selling into Australia; 95 cents is higher than it's been for a long time. I think 12 months ago it was as low as 80c [Australian]," English said.
"So it's a bit of a concern, but I would imagine the Australian economy will turn out to be a bit stronger than people would expect and we'd like to see that exchange rate drop back."
The exchange rate did not match the likely relative performance of the two economies, English said.
"I think it's too high, yes, and I think the Australian economy's a bit stronger, relative to ours, than that indicates."
He declined to say what impact an interest-rate hike might have on the economy, saying that was a matter for the governor of the Reserve Bank.
The bank is due on Thursday to review the OCR, which has been at an all-time low of 2.5 per cent since just after the Christchurch earthquake in February 2011.
Most commentators expect the central bank will wait until March to increase the OCR, although New Zealand's largest bank, ANZ, has tipped a hike this week.
- © Fairfax NZ News