Australians hoarding cash as millions of banknotes ‘go missing’

Font Size:

Toilet paper, pasta, soup, rice, flour, cleaning products. We’ve shown ourselves to be world champion hoarders from the outset of the coronavirus pandemic. But there is another item we’re accumulating – cash.

Despite the push towards digital transactions during the crisis, so many Australians have been stashing cash that the Reserve Bank has increased the notes in circulation from $83 billion to $94 billion.

“The central bank has seen a sharp uptick in Australians stocking up on banknotes in recent months on the back of growing financial concerns,” reports Business Insider.

COVID-19 has “accelerated the shift to electronic payments, [but] there has, paradoxically, also been record demand for banknotes,” Reserve Bank of Australia (RBA) governor Philip Lowe told a parliamentary committee.

“Some people seem to be wanting to keep some extra money at home.”

This is despite cash withdrawals dropping by half at the start of the pandemic.

The RBA believes a small group has taken out a “disproportionate” amount of cash. These people might be spooked by the prospect of recession or negative interest rates and some may be worried about a government proposal to ban cash transactions over $10,000.

“The $50 is the note of choice for those keeping cash under the mattress,” reports Nine, with 143 million more on issue in July than in February.

“There are now $46.4 billion worth of ‘pineapples’ around, compared to fewer than $40 billion at the start of the year.”

Previous RBA research found ongoing growth in circulation “appears to reflect growing use of banknotes as a store of value”. Up to three-quarters of outstanding banknotes, by value, are used for this purpose.

Cash, while used less frequently than in the past, “is still widely held for precautionary purposes”, the RBA said.

RBA senior manager Richard Finlay told a senate inquiry into the proposed cash ban last year: “It’s probably the case that most households have very little and a few households have a lot, and maybe people overseas hold Australian dollars.”

The ABC reports consumers aged 65 or over still made over half of their payments in cash in 2019.

“Lower-income households also tend to pay in cash more often than households in higher-income groups.

“And while cards are now used more often than cash for all payments over $5, cash still accounts for a significant share of small transactions: about 45 per cent of payments of $10 or less.”

There is an international push for a world without cash, in part to counter illegal activities such as tax evasion, drug trafficking and terrorism.

In Australia, the government estimates up to $50 billion is lost to the black economy each year.

Some European countries have already banned cash purchases for large transactions. China is moving to replace cash with a central bank-issued digital currency.

Only 27 per cent of Australia’s consumer payments were made with cash in 2019, compared with 37 per cent in 2016, and 69 per cent in 2007.

Nearly a third of people who received the federal government’s first COVID-19 stimulus payments in March saved the money, according to Australian Bureau of Statistics (ABS) data.

The $750 payment to 6.5 million Australians was intended to encourage economic activity via spending.

However, 29 per cent of recipients saved it, and 28 per cent used it to pay bills.

The survey of about 2600 people, conducted between May 10 and 23, found 12 per cent mainly used the money to buy food.

It also showed less than 10 per cent of people used it to pay their mortgage or rent.

The data showed nearly 70 per cent of the stimulus went to people aged 65 and over, and 45 per cent of that group added the money to their savings.

Brendan Coates, household finances program director at the Grattan Institute, said retirees tended to save extra money.

“Savings rates rise even if the payments are effective,” he said.

“You don’t spend it all, that gives us more of a buffer as we come off the JobKeeper and JobSeeker payments.

“Our research shows that the average retiree is a net saver, that even applies to those receiving the pension,” he said.

“They are saving for a rainy day, even when it is pouring outside.”

If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.

RELATED LINKS

What COVID-19 taught us about investing for retirement income

The ‘Bears' are up against the ‘Goldilocks' to see whose savings perform the best.

Government and community support you should know about

Support payments, Age Pension updates, Robo-debt refunds, free travel and more.

Nothing like a pandemic to put pressure on estate planning

Why we need to get our affairs in order - and keep them that way.

Written by Will Brodie



SPONSORED LINKS

Sign-up to the YourLifeChoices Enewsletter

continue reading

Podcast

Podcast: Banishing winter blues with cold water companionship

COVID lockdowns can do funny things to people, but last year Melburnian Belle Galloway decided to do something she had...

Travel

Soothe your soul with these stunning images of Japan's cherry blossoms

It's sakura season, the perfect opportunity for locals to indulge in hanami, the traditional Japanese custom of 'flower viewing'. On...

Travel

Discover New Zealand's best winter attractions

To mark the start of the trans-Tasman bubble, here are some of the best things to do in New Zealand...

Travel

Check your passport's expiry date before booking

International travel seems to be slowly but surely returning. With the trans-Tasman bubble and talks of another bubble opening with...

Travel

Tips for getting a good night's sleep on holiday

Travel can seriously mess with our sleep. The jet lag that disrupts our body clocks may be the most obvious...

Travel

Tasmania's top spots for shopping and markets

The Margate Train offers shopping with a difference at Margate, southern Tasmania. Margate is 20 minutes south of Hobart (19km)...

Travel

What will it take for travel to get restarted again?

Maraid is encouraged by the travel bubble with New Zealand opening up and wonders what needs to happen before we...

Travel

The unbelievable software flaw that led to a major flight incident

When it comes to flight engineering, you would hope that every possibility has been factored in to perfection, but a...

LOADING MORE ARTICLE...