Big Mac Index says NZ currency is 'about right'

The latest edition of a popular exchange rate comparison measure shows New Zealand’s level is about right.

The Big Mac index has become a global standard since its invention by The Economist magazine in 1986.

It compares the price of a McDonald's Big Mac around the world and is based on the theory of purchasing-power parity (PPP).

This is the notion that in the long run exchange rates should move toward the rate that would equalise the prices of an identical basket of goods and services.

The latest version based on the US dollar show the cheapest Big Macs are in India and South Africa, implying their currencies are under-valued.

By contrast, the most expensive are in Norway, at 60% more than in the US, followed by Venezuela and Switzerland, where they are 52$ dearer.

New Zealand is 1.1% undervalued with The Economist pricing a $5.50 Big Mac here at $US4.57, slightly higher than the actual $US4.62.

The UK is the least over-valued currency at a disparity of just 0.1%. Australia is under-valued by 3.3%

This article is tagged with the following keywords. Find out more about My Tags

Comment & Question

Commenter icon key: Subscriber Verified

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot

Forex

Sym Price Change
USD 0.7709 0.0011 0.14%
AUD 0.9472 0.0003 0.03%
EUR 0.6245 0.0006 0.10%
GBP 0.4944 0.0004 0.08%
HKD 5.9783 0.0083 0.14%
JPY 91.3730 -0.0820 -0.09%

Commods

Commodity Price Change Time
Gold Index 1189.4 -2.770 2014-12-17T00:
Oil Brent 61.2 -1.020 2014-12-17T00:
Oil Nymex 56.8 0.920 2014-12-17T00:
Silver Index 15.9 0.138 2014-12-17T00:

Indices

Symbol Open High Last %
NZX 50 5496.6 5532.8 5496.6 0.40%
NASDAQ 4556.9 4651.9 4547.8 2.12%
DAX 9455.7 9589.2 9563.9 -0.20%
DJI 17069.2 17389.3 17068.9 1.69%
FTSE 6331.8 6359.7 6331.8 0.07%
HKSE 22878.3 22935.0 22585.8 0.99%
NI225 17143.0 17274.2 16819.7 2.32%