By Richard Giedroyc
The possible demise of Australia’s 5-cent coin may be opening a can of worms Down Under regarding the future of physical cash, that being coins and bank notes.
The Royal Australian Mint is currently celebrating the 50th anniversary of Australia’s decimal currency. The event is being marked by commemoratives and a book titled Inside the Vault by Peter Rees.
The RAM isn’t being too quick to put candles on the cake. Royal Australian Mint head and Assistant Minister to the Treasurer Alex Hawke is reported in the Feb. 14 issue of Business Day newspaper to have said, “We can foresee a time in the near future where [the 5-cent coin] will be removed from circulation. The inevitable forces on that are at work.”
RAM Chief Executive Ross MacDiarmid added he expects the 5-cent coin to “die of its own accord” without having to officially withdraw the coin from circulation. According to MacDiarmid, “On the basis of current demand for the 5-cent piece our forecast is that it’s likely to drop off our production requirements in the next five to 10 years.”
MacDiarmid is basing his conclusion on the fact that the official 2014 mintage figures of 58.2 million 5-cent coins is significantly lower than is the 145.3 million produced a decade earlier. Despite MacDiarmid’s comments, the coin has survived political debate about its possible removal in 2009 and in 2011.
It cost the mint seven cents to strike a 5-cent coin in 2015; however, due to the recent decline in copper and nickel commodity values it once again now costs less than its face value to mint the denomination. There was a 25 percent decline in demand for coins throughout a three-year period, but during 2015 demand once again increased.
It is estimated there are about 5 billion coins and 1.3 billion bank notes in circulation in Australia. According to the Feb. 14 Business Day article, “The chief of the mint surmises that people still appreciate the security, trustworthiness, and anonymity of cash and transacting with it.”
It isn’t time to shut the doors to the mint permanently, but some people are beginning to wonder. Sweden and Denmark are aggressively trying to convince their citizenry to abandon physical cash for more modern currency exchanging or “cashless” technologies.
Bank of Finland statistics indicate seven of 10 Fins use cards exclusively, with only 13 percent paying with cash. The use of coins is dwindling, but due to foreign demand for its bank notes, the notes are being printed at record rates.
Russians are among those who would prefer to hold euros or dollars since they don’t trust the value of the ruble. The very thought of a cashless society would have 19th century writer Fyodor Dostoevsky turning over in his grave. Dostoevsky once described cash as “minted freedom.”
The European Central Bank is moving towards abolishing printing the 500-euro bank note. The German government wants to limit cash payments to that same amount. Merchants in the German city of Kleve are refusing to accept 1- and 2-cent euro coins. Yet a vast majority of Germans still insist on cash transactions only.
On Feb. 12, Austrian Deputy Economy Minister Harald Mahrer was on Austrian public radio station Oe1 where he said, “We don’t want someone to be able to track digitally what we buy, eat and drink, what books we read, and what movies we watch. We will fight everywhere against rules,” referencing the European Union consideration of putting limits on how much cash someone can spend.
The attitude of the Germans and Austria’s Harald Mahrer appears to be in contrast to that of Australians. A 2015 Westpac report determined Australia would become cashless by 2022.
In Australia, People’s Choice Credit Union Chief Executive Officer Steve Laidlaw said cash withdrawals at automatic teller machines have been declining by about 10 percent annually. Laidlaw said the 5-cent coin would likely disappear as have Australia’s 1- and 2-cent coins as inflation reduces the value of the denomination to almost nothing.
Laidlaw said, “I would expect the $5 note to become a coin as well (Australia already has a $2 coin.),” adding, “Research has found you are much more likely to feel your mobile phone is missing within about 20 minutes rather than your credit card, and phones have additional security devices.”
PCCU uses financial technologies including fingerprint authorization to make a transaction.
Kevin Davis is the research director at Australian Centre of Financial Studies. On Feb. 7 Davis told News Corp Australia, “the writing is on the wall” for coins and bank notes.
Davis continued, “I think it’s safe to say it’s highly unlikely that notes and coins will be around in 50 years’ time.” Davis acknowledged, however, that “It [coins and notes] is still likely to be in demand from those who want to remain anonymous.”
Not everyone or every statistic agrees that physical currency is on its way out. CommSec Chief Economist Craig James has pointed out that the Reserve Bank of Australia has been recently increasing the number of $100 bank notes it is issuing.
James questioned, “Are the notes being held in safe deposit facilities at bank[s] or being stored in safes?
“Consumers are embracing technologies at a faster and faster rate – there’s a willingness to explore and experiment with new ideas and approaches if they offer greater convenience and value,” said James. “There’s a strong business case for governments and consumers to phase out cash.”
One of the problems for the cashless movement looming on the horizon is negative interest rates. This situation already exists in Japan, where banks must pay the central bank for deposits rather than the other way around. These losses will eventually be passed on to consumers through their bank accounts, which in turn will likely encourage people to withdraw their money in coins and bank notes.
The Feb. 12 issue of the newspaper, The Telegraph, reported, “people would begin to treat highly negative interest rates as a form of confiscatory taxation.”
The article continues, “The policy would also blur monetary and tax policy: should central banks be in charge, or politicians? This would devastate central bank independence.
Criminals who wished to evade tax or engage in illegal activities would still be able to bypass the system: they would start using foreign currencies, precious metals or other commodities as a means of exchange and store of value or, turn to new, private digital monies à la Bitcoin.
Abolishing cash would also abolish privacy.”
Editorializing, the article concludes, “The last thing we now need is harebrained schemes to abolish cash.”
And, just think, no one has asked coin collectors what we think of going cashless.
This article was originally printed in World Coin News.
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