Experts Patrick Elkington and Rochelle Guttmann have shone a light on this phenomenon, suggesting a shift in behaviour where Australians increasingly hold onto banknotes. Whether viewed as a method of safeguarding wealth or as cautious reserves, the number of hoarded banknotes in June 2023 represented a remarkable 55 to 80 percent of all physical bills in circulation—a jump of about 5 percentage points since the pandemic's beginning.
The allure of cash appears to transcend the full breadth of denominations, from the humble $5 and $10 notes to the more hefty $50 and $100 bills. Yet, amidst these, the $20 bill exhibited the least likeliness to vanish into the abyss of sofas and car seats, contrary to its cousins. The authors imply that lower-value notes may simply not command the same watchful eye as larger bills do; then again, the latter could be squirreled away, only to be neglected or lost.
While it may seem counterintuitive, the appeal of banknotes soared during the pandemic despite a noticeable drop of 5 percent in their use for routine transactions since early 2020. Back in December 2022, demand for banknotes reached its peak within the current context, heightening by 22 percent or an additional $19 billion from March 2020 to December 2022. This keeps the circulation of cash close to historic highs.
Yet, as Australians collectively tighten their grip on cash reserves, fewer people opt to use it for their day-to-day expenditures. A previous report from November 2023 disclosed a distinct downturn in the frequency of cash-based transactions in the prior three years, with repercussions of the COVID-19 saga and advancements in mobile technology—such as Apple Pay—catalyzing this shift.
In 2022, a mere 13 percent of total consumer payments were conducted with cash, signalling a significant downturn of 14 percent from the statistics recorded in 2019. The trend was especially pronounced for small-scale purchases under $50, reflecting the burgeoning appetite for tap-and-go and contactless electronic payments in the wake of societal changes spurred by the pandemic.
- Cash payments remained common for transactions involving exact amounts, like $5, $10, $20, $50, and $100, where there's typically no need for change or coins.
- The continual sway away from cash for minor purchases is indicative of a broader embrace of digital payment solutions in the post-pandemic era.
As we look forward, these evolving habits present a fascinating glimpse into the changing currency landscape in Australia and raise questions about the future role of physical money in an increasingly digitized economy.
