In circulation. Photo: Image ForumWhat with myki cards, Opal cards, e-TAGs, epay, payWave, bitcoin and mobile phones, we’re using less cash than ever, right? Not on your life.
The latest Reserve Bank figures show there were seven $5 notes per person in circulation in 2015, well up from five per person ten years earlier, and four 10 years before that.
(If those numbers seem small, but climbing, it’s because the same notes get used over and over. They are a bit like extras in a movie.)
We have around six $20 notes per person, close to a record high, and far more $50 notes than we used to (25 per person) because of their use in automatic teller machines. But it’s the use of $100 notes – the kind most of us hardly ever see, and the kind bank transfers should have rendered redundant – that is exploding.
Twenty years ago there were only five $100 notes per person in circulation. They were less common than $20 notes, which was appropriate given they were far less used. A decade later in 2005 after the introduction of the goods and services tax (the one we were told would kill the cash economy) we had seven per person, and now we have 12. A graph included in the latest Reserve Bank annual report shows the number of $100 notes in circulation climbing faster than any other denomination.
Note that I said “in circulation”. They are certainly not in day-to-day use. A few years back I was asked on ABC radio what colour they were. I had to guess, and I guessed wrong. Whereas the lobster-red $20 notes are always in and out of our purses and wallets and last about 12 years before being damaged and returned to the Reserve Bank, the Bank expects the typical $100 note to last 70 years. When they do come back they are often not even unbundled.
Who’s got them? According to The Curse of Cash released this week by influential US economist Kenneth Rogoff, they are mainly in the hands of drug lords, human traffickers and tax evaders. We are actually worse than the United States, according to Rogoff. Ninety-two per cent of our currency is in large denomination notes, compared to 84 per cent in the US. Only Switzerland, Israel, Norway and Russia use big notes more than we do.
Rogoff wants us to go “cashless”, at least for denominations above $10, and eventually he would turn the $10 note into a coin to make it harder to move around undetected. Phasing out high denomination notes would be painless, for those of us with nothing to hide. We would be invited to deposit them in banks in return for their full value up until a deadline, after which they would no longer be legal tender and worthless.
Naturally, there’s a catch. Our Reserve Bank, like the US Federal Reserve, makes money from issuing $100 notes. It’s conflicted, being in effect a silent partner in organised crime.
Peter Martin is economics editor of The Age