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A new newspaper from the Reserve Bank of Australia says Australians are choosing to keep cash for retirement and asset retention reasons.
The Review of Banknote Distribution Arrangements Issues Paper released Tuesday by the RBA highlights the move away from cash as a means of payment for Australians, with an estimated nearly three-quarters of the banknotes issued by the RBA being hoarded.
In the paper, the Reserve Bank’s Consumer Payments Survey shows that the percentage of total retail payments, both in person and online, with cash has decreased from 69% in 2007 to 27% in 2019.
The RBA said that cash is most commonly used for low value transactions, although this is changing rapidly with the advent of card and contactless payment methods, resulting in subdued demand for low value banknotes.
Nonetheless, the RBA notes that cash remains a necessary means of payment for high cash users who make up 80% of their personal transactions, including those who are elderly, have low household incomes, live in regional areas, and have limited internet access to have .
Reserve Bank of Australia’s assistant governor for business services Michelle McPhee said the RBA is determined to meet public demand for banknotes so that cash continues to be available to those who wish to use it.
“It is very important to us that the community continues to have access to cash withdrawal and deposit services,” said Ms. McPhee.
“To achieve this, it is critical to have a banknote distribution system that is sustainable in an environment of declining cash use in transactions.”
Hoarding money for wealth
Similar to the global financial crisis, the outbreak of the COVID pandemic across Australia spurred a surge in demand for high quality banknotes as Australians tried to navigate a period of economic uncertainty.
Given the current low interest rates on savings and fixed-term deposit accounts across the sector, this makes holding cash relatively more attractive because the opportunity cost of holding physical cash is lower.
The RBA currently determined about 73% of the number, and 94% of the value of banknotes in circulation are in the $ 50 and $ 100 denominations.
In October, the RBA announced that the total value of Australian banknotes in circulation was $ 100 billion, double the value at the same time in 2010.
Currently, the RBA has announced that the value of banknotes in circulation has increased by 20% from February 2020 to October 2021.
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