Is this a sign of that urban story that Australia is now a high cost country with a high value currency?
Figures in the Reserve Bank’s 2012-13 annual report, out yesterday show that Australia is discovering an increased appetite for $100 notes to go with our already strong level of desire for the $50.
It could be the demand from the casino industry, from some parts of business, or from an increasing number of ATMs where $100 notes are being added to the favoured $50 note.
Or it could be a sign of the cash or so-called ‘black’ economy on the rise. The exact reasons are unclear, the evidence if more anecdotal than empirical.
Details in the Reserve Bank report reveal that the value of $100 notes in circulation rose 8% in the year to June, much faster than the 5.2% increase in the number of $50 notes. Thanks to the strong growth in the value of $100 notes in circulation, the value of all notes in the system rose 6.2% (7% in 2011-12).
In contrast, growth in demand for the $5, $10 and $20 notes was much slower at between 3% and 4%.
The RBA said that at June 30 this year there were 1.2 billion banknotes worth $56.9 billion in circulation (1.1 billion and $53.6 billion in 2011-12).
Although $5, $10 and $20 banknotes accounted for 35% of the number of banknotes in circulation in 2012-13, they represented only 9% of the value of banknotes in circulation.
The increase of 100 million extra notes, worth $3.6 billion, was much slower than in 2008-09 at the height of the GFC when the value of notes on issue jumped by a massive $6 billion, or 14%. That was as many Australians quietly withdrew cash from the banks in the wake of the collapse of Lehman Brothers and the near implosion of financial markets.
Many of those notes remained outside the banking system judging by the very small rate of growth in the following financial year. The increase in the value of currency circulating in the economy rose by a tiny $650 million from 2008-09 to 2009-10. That was the smallest annual increase in the past decade. It seems much of the money quietly withdrawn (especially in the closing months of calendar 2008 and early 2009) remained in the economy to be either redeposited slowly, or used.
Australia’s preference for $100 notes grew during the GFC with the RBA figures showing the value of $100 notes grew $4.9 billion from 2008-09 and 2012-13. By way of contrast, the value of $50 notes only rose $3.2 billion in the same period. In other words, demand for $100 notes grew 50% faster (by value) than for $50 notes.
The $50 and $100 notes accounted for 91% of the value and 65% of the number of notes on issue in 2012-13, which was unchanged on the previous year.
The Reserve Bank said it purchased 197 million banknotes from Note Printing Australia in 2012-13, up a substantial 68 million from 2011-12 when the bank purchased 129 million notes. Most of the increase came in extra $50 notes.
The Bank purchased new banknotes for all denominations: 20.1 million $5 banknotes (against 29 million the previous year), 26.6 million $10 banknotes (29 million), 30.1 million $20 banknotes (no $20 notes in 2011-12), 80.1 million $50 banknotes ($40 million) and 40.1 million $100 banknotes (31 million).
The RBA said the 6.2% rise in the value of banknotes in circulation was "broadly in line with long-term trend growth rate."
The bank said that cash-in-transit companies (such as the Toll Security company) manage banknote holdings on behalf of commercial banks in approved cash centres across Australia, to ensure that there is sufficient stock to meet public demand. "Banknotes are also held by the Reserve Bank to meet seasonal fluctuations in demand and mitigate the risks associated with systemic shocks and production disruptions. The Bank has established agreements with the commercial banks that ensure their access to these banknotes," the bank said in yesterday’s report.
"In 2012/13 the Reserve Bank issued banknotes worth $8.9 billion, $3.6 billion of which had previously been in circulation and were deemed to be fit for purpose. Banknotes worth $5.6 billion were returned to the Bank, of which banknotes worth $3.6 billion were deemed to be suitable for reissue and banknotes worth $2.0 billion were deemed unfit for recirculation.
"In 2012/13 the Bank processed 14,765 damaged banknote claims and made $10.4 million in payments. This represented a $4.3 million increase on 2011/12, largely as a result of $2.6 million of claims arising from floods in Queensland and New South Wales.
"In 2012/13 a total of 12125 counterfeits were detected in circulation, with a nominal value of $730 700. This corresponds to around 10 counterfeits detected per million genuine banknotes in circulation. While this represents an increase from the previous year, this level remains low by international standards and is similar to levels experienced in Australia in recent years," the bank said.
