Australians hoard cash as major banks begin implementing digital framework

By January 2024, the nation's fifth largest bank, Macquarie Bank, aims to have shifted away from using check and phone payments in addition to cash in branches.

Australia’s fifth most valuable bank, Macquarie Bank, has announced that it will no longer allow cash transactions in all its branches, and will begin phasing out all cash, check, and phone payment services from January. There are concerns that it is another incremental step towards the establishment of a cashless society, a slow suffocation designed not to draw too much attention.

In addition to the Macquarie move was the announcement that cash will no longer be available over the counter at some Commonwealth Bank branches in Sydney, Melbourne, and Brisbane. Macquarie Bank is a global bank; only about 30 per cent of its assets under management are in Australia. It has a small domestic customer base of only 1.7 million. The Commonwealth, Australia’s biggest bank, has ten times that number, meaning any change in its policies on cash availability will have a bigger impact.

There is understandable anxiety in Australia about the move towards a digital-only system, and at first glance it seems the use of cash is fading. According to the Reserve Bank of Australia (RBA) only seven percent of Australians are “high cash users”: people who use cash for 80 percent or more of their in-person transactions. That represents a 50 percent drop since 2019. Likewise, in the three years to 2022, the share of in-person transactions made with cash fell from 32 percent to 16 percent.

The value of banknotes in circulation is over 102 billion AUD, which is equivalent to around 4.5 percent of nominal GDP. In the United States, currency in circulation equates with about 10 percent of GDP, while in the U.K. it is only the equivalent of two percent of GDP. That puts Australia in the mid-range.

Yet there are signs of some resistance against the removal of cash. According to the RBA, the way that Australians are using cash is changing. In recent years there has been weak growth in the use of low denomination banknotes ($5, $10, and $20), which tend to be used for small purchases in stores or for merchants to provide change.

By contrast, the rate of growth in high denomination banknotes on issue ($50 and $100 banknotes) “has remained strong over the past decade, with a particularly large spike during the pandemic,” the RBA says. “Strong growth in high denomination banknotes reflects the increased desire in the community to hold banknotes as a precaution, or store of wealth.”

Cash, it seems, is being hoarded because many Australians do not trust their system. They are preferring to keep some themselves, rather than leaving it all as deposits in banks.

The availability of Automatic Teller Machines (ATMs) is being reduced, which is also discouraging the use of paper money. Since 2016 about a quarter of ATMs, 8000, have been closed. Most were owned by the big four banks, but they are not the only suppliers. Independently owned ATMs, which usually charge a fee, are enjoying a rising share of the ATM market. It is also still possible to withdraw cash at Australian supermarkets.

The main concern is that this dominance of digital technology will be used to control people’s financial lives – hence the hoarding of large denomination bank notes. If there is such a threat it is more likely to come from the private banks refusing to supply services or closing accounts, a problem that has become severe in the U.K. where the banking sector seems to have become infected by politics.

It seems unlikely that a central bank digital currency (CBDC) will be created because it would put the Reserve Bank – whose principal job is to manage how money moves between banks – in competition with both private banks and credit card companies. Will the proposed CBDC, for example, have an interest rate on it? If it does not, that will tend to destabilize the whole capitalist system, which is defined by the interest rate, or cost of capital. And imagine the threat to the credit card industry, where interest rates are typically over 20 percent.

There is good reason to be suspicious of Australia’s monetary authorities and dominant financial players, especially the Big Four banks. But finance industry players tend to look after each other, and creating a CBDC does not seem to be a way to do that.

(Article by David James republished from

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