Over the past decade sightings of $50 and $100 notes have continued to become a rare method of payment. During the covid-19 pandemic, online sales boomed as shops closed. Those that remained open preferred the more hygienic tap-and-go method with bank cards or phone.
All of these findings might mean that it is a huge surprise to know that there is a record amount of bank notes circulating in the economy. The problem is, they’re mostly stuffed between mattresses or hidden in the nation’s sock drawers.
“I’m sure this surprising to many people given their own experiences, as people are using cash less and less. But bank notes are increasingly being used as a store of wealth, and that means they are basically under mattresses [rather] than in registers,” says Melissa Hope, Head of Note Issue at the RBA.
Prior to the covid-19 pandemic there were about $80 billion in notes circulating in Australia. Within a year, that figure increased to $100 billion a 25 percent increase in a very short period. This is a lot of money.
Cash hoarding was a trend that began to be noticed in the early stages of the covid-19 pandemic.
However, the latest figures from the RBA show that hoarding is continuing. Most of the cash withdrawn from ATMs during the pandemic was in $50 and $100 notes.
These notes are generally not being used to purchase goods and if you ask your local barista, not many people are buying a latte with a pineapple.
The RBA has two theories regarding why this unusual trend is occurring. The first theory is related to economic uncertainty.
“When people are uncertain, you see a sizeable surging in cash demand — we saw this during the financial crisis in 2008. But there’s another reason, too: interest rates are low. People don’t lose as much in the way of interest by having their money under the mattress compared to in a bank account,” says Melissa Hope, Head of Note Issue at the RBA.
In reality, this trend is an anomaly. People are still moving away from cash, there’s no doubt about it.
Cash is still being used to buy coffees or pay for parking, but the long-term trend is clearly moving towards digital transactions.
These changes are one reason why the RBA has announced a review of how banknotes are distributed around the economy.
“We are conducting a public consultation to determine what changes we might need to make to the distribution system to make it fit for purpose, acknowledging that cash usage will continue to change. We print as many bank notes as what we think will be needed by demand,” says Melissa Hope, Head of Note Issue at the RBA.
Covid-19 Is Speeding Up Australia’s Transition Towards A Cashless Society
The covid-19 pandemic has forced Australians to reassess their relationship with cash. Handling physical money has the potential to transmit covid-19 from one person to another. As a result of this many businesses are only providing customers with the option to make contactless payments by paying with their bank cards or smart phone devices.
There are a number of other factors that are pointing towards the idea that Australia will eventually become a cashless society or at least a society where paying with cash is a very niche payment method.
In December 2008, collectively Australians withdrew over $13.5 billion from ATM’s each month.
Since reaching that peak, the trend has continued to rapidly decline overtime. When Covid-19 fears hit fever pitch in April 2020, that ATM withdrawal amount dropped significantly to $6.2 billion. This down by more than half of the record high recorded figures.
Cash payments than rebounded to about $8.5 billion per month. This is still a 37 percent drop over the past decade, according to Reserve Bank data analysed by the Australian Banking Association.
In comparison, the percentage of purchases made on credit and debit cards has skyrocketed in the past decade.
Furthermore, consumers are also using digital wallets like Apple Pay, Google Pay and Samsung Pay to pay for their goods. Figures illustrate that seven out of every 10 smartphone users across the country pay for a product via their digital wallets each week.
Consumers have also gravitated towards buy now, pay later (BNPL) apps like Afterpay, Zip and Openpay, which are similar to old fashioned lay-by except you can take your goods home straight away.