Comparing burgers to burgers to value currency

The New Zealand dollar is 26% undervalued relative to the greenback, if burgernomics can be believed.

Burgernomics, to the uninitiated, is otherwise known as the Big Mac index.

The latest iteration of the index, invented by The Economist in 1986 as an easily digestible currency exchange indicator, places the average cost of a Big Mac at $6.40 in New Zealand, compared to $US5.74 in the US.

The difference suggests the New Zealand dollar is undervalued.

In effect, the index places the New Zealand version of the Mac as the 14th most expensive in the world, only slightly more undervalued than Australia and Singapore.

The only place more expensive than the home currency, the US, is Switzerland, which comes in at 14% overvalued, according to the index.

Other contenders at close to the US base rate price are Sweden, Canada and Norway, while the three most undervalued currencies, are listed as South Africa, Malaysia and Russia - countries where the burger can be picked up at the drive-through for the equivalent of around $2.

The culinary index is based on the theory of purchasing power parity (PPP), which indicates that over time, exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services in any two countries.

There are a number of variations on the Big Mac index theme.

UBS Wealth Management, for example, factored in the number of hours that an average worker needed to work to earn enough to buy a burger, while other indexes sprung up based on globally accessible products such as Apple iPhones and Starbucks coffees.

However, there is no argument that Big Macs are more accessible than almost any other conceivable consumable product on the planet.

The first McDonald's restaurant in New Zealand opened in 1976 in Porirua and today there are 167 across the country.

Eight percent of those are franchised operations, including the three in Dunedin.

That pales into insignificance compared to the 14,000 across the US.

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