Demand for cash that (mostly) will never be used and never see daylight continues to march along.
The Reserve Bank of Australia’s weekly balance sheet shows A$101.34 billion in currency as being – nominally – in circulation.
The rise in demand for banknotes over the last week is nothing special; but the scale of banknotes deemed to be officially in circulation – but aren’t – remains one of the curios of the Australian experience of the pandemic.
Less than $10 billion in cash is genuinely in circulation, in the sense that it’s being used as a means of payment.
The RBA’s recent issues paper centred on banknote distribution arrangements acknowledges the data but does not dig deep.
“Cash is increasingly used as a store of wealth” was one sub-head in the paper, noting much of the growth in banknotes in circulation “has been driven by demand for higher-denomination banknotes.”
Around 73 per cent of the number, and 94 per cent of the value, of banknotes in circulation are accounted for by the $50 and $100 denominations.
The issues paper argues: “The store-of-wealth function performed by banknotes is particularly important during times of financial and economic uncertainty, such as the global financial crisis and the COVID-19 pandemic. The current low level of interest rates also makes holding cash relatively more attractive, due to the lower opportunity cost of holding physical cash (which earns no interest).”
Measured as a ratio to GDP, the value of currency in circulation reached a historic high in the March quarter of 2021 at 4.8 per cent.
Those in the business of supplying cash to consumers believe “the evidence is increasing that people are using cash to protect their privacy and protect their information.
"There is a growing realisation, and it's coming through in the numbers, that consumers are not flocking to the cashless society, they are wary of it,” Tim Wildash, CEO of Next Payments told Banking Day.
“They believe that lenders, marketers and others are using their information and they don't like it.
"The ATM industry in Australia is preparing for an increase in ATM withdrawals over the next few months."