The Review of Banknote Distribution Arrangements Issues Paper published by the RBA on Tuesday highlights the shift away from cash as a means of consumer payment for Australians, with nearly three-quarters of banknotes on issue from the RBA estimated to be hoarded. 

Within the paper, the Reserve Bank’s Consumer Payments Survey shows that the share of total retail payments, both in-person and online, made with cash fell from 69% in 2007 to 27% in 2019.

The RBA said cash is used most often for low-value transactions although this is rapidly changing with the uptake of card and contact-less payment methods resulting in demand for low-value banknotes subdued.

Despite this, the RBA notes cash continues to be a necessary payment means for 'high cash users' accounting for 80% of their in-person transactions including those who are older, have low household income, live in regional areas, and limited internet access.

Reserve Bank of Australia Assistant Governor of Business Services, Michelle McPhee, said the RBA is committed to meeting public demand for banknotes so that cash continues to be available to those who want to use it.

"We place a high priority on the community continuing to have access to cash withdrawal and deposit services," Ms McPhee said.

"Having a banknote distribution system that is sustainable in an environment of declining transactional cash use is critical to this goal."

RBA Cash Payments.JPG 

Hoarding cash for wealth

In similar fashion to the Global Financial Crisis, the onset of the COVID pandemic across Australia marked a surge in demand for high-value banknotes as Australians sought to navigate a period of economic uncertainty. 

Given the current low level interest rates offered across savings and term deposit accounts sector-wide, the RBA said this makes holding cash relatively more attractive as the opportunity cost of holding physical cash is lower. 

The RBA noted currently around 73% of the number, and 94% of the value of banknotes in circulation are accounted for by the $50 and $100 denominations. 

As of October, the RBA said the total value of Australian banknotes in circulation was $100 billion, double their value at the same point in 2010.

Currently, the RBA said the value of banknotes in circulation increased by 20% from February 2020 to October 2021. 

Value of Banknotes in Circulation.JPG


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