The New Zealand dollar promptly dropped almost half a cent in value when the International Monetary Fund opened its mouth this morning.

The IMF said the Kiwi was overvalued by as much as 25 percent, but it is hard to know whether those with dollars to spend need to brace themselves or not.

The strong dollar has been shielding New Zealand from the full effects of rising oil prices and perhaps drivers should savour this Easter's five cent cut in the petrol price because the IMF says our dollar is overvalued and could fall once the United States starts raising its interest rates.

“The currency is higher than we'd expect at this stage of the recovery. Normally it would be lower which would fire up our exports and get our recovery going. So it’s one of the reasons that the recovery has been a bit slower than you'd normally expect coming out of a recession,” say Finance Minister Bill English.

The New Zealand dollar fell almost half a cent within five minutes of the report's release - although soon started climbing back.

“Ultimately the New Zealand dollar is not driven by official reports. The New Zealand dollar is driven by investment flows and those investment flows, clearly, people are putting their money into New Zealand and Australia and I don't believe that is going to stop,” says currency strategist Derek Rankin.

Although it thinks the currency is too high, the IMF says New Zealand's policy of having a free floating currency is the right approach.

“A longer term perspective the currency does look a bit on the high side. I think the issue is in the short term the currency is reflecting the fact that in countries like the US and the UK, the fundamentals there are pretty soggy,” says Nick Tuffey, ASB chief economist.

Even the experts can't agree where the New Zealand dollar is going.

“When we see interest rates here lift up that will give the Kiwi a short term boost, but longer term we'd expect the Kiwi to drop, but only modestly,” says Mr Tuffey.

“We have a target for the dollar, as you know, of 82 and we are holding to that,” says Mr Rankin.

The IMF says our economy will grow by about three per cent this year and next.

It would like to see the Government go further to cut its spending - a move that has been ruled out by Bill English.

Job growth will lag the economic recovery. The IMF predicts the unemployment rate will hit seven and a half per cent later this year.