The Elimination of Cash in Australia: Another Central Bank Digital Currency (CBDC) Experiment By James Reed

Here is an update on the drive to eliminate cash in Australia. We know that the federal government is wanting to establish a Central Bank Digital Currency (CBDC), but most people do not realise just how quickly everything is coming together. The idea seems to be to use the attack upon cash to leave no option for people. We have documented at the blog the banks that have moved to ban cash, and a summary from Lifesite, is given below. The core argument of the government and banksters is that people are using less cash, so let’s ban it altogether. It is like arguing that people are using less water, so let’s ban water, the same illogic.

One alarming prediction is that cash will be functionally gone by 2025; it will be that organisations like supermarkets will cease to take cash and there will be nothing that one can do about it. Hence, it is vital that the next thing after the Voice referendum fight will be to address this issue; there has been some success in the UK against this, but here in Australia resistance has been slower, so we need to get to work.


“Australia is rapidly heading towards becoming a “cashless society” as banks crack down on withdrawals, close ATMs and branches and ban cash altogether — with one expert predicting physical money will be completely gone by the end of the decade.

“I’d say we’ll be functionally cashless by the end of 2025 — it’ll just be a complete rarity,” said Richard Holden, professor of economics at UNSW Business School.

“But unless the government gets involved to accelerate the process I think we’ll be actually cashless by 2030.”

Macquarie Bank this week announced it would be phasing out cash altogether next year, following similar moves by Commonwealth Bank, NAB and ANZ to stop handling cash in a few branches.

The shock announcement comes after banks’ efforts to make it more difficult for customers to transact in cash have sparked backlash in recent months.

In response nother money expert has warned Australia’s banks could soon start “cash rationing” at ATMs.

Finance expert Sarah Wells said they may make the move because of the lower demand for banknotes.

She predicted this could mean limits for ATM withdrawals and that customers could even be restricted from withdrawing funds from automatic teller machines other banks operated.

“There is the possibility that as we reduce the demand for cash, or reduce the availability of cash, then there’s going to be limited amounts of actual, physical cash held,” Ms Wells told the Daily Mail.

 Cash rationing is where banks only hold limited amounts of physical money in their ATMs.

In July, a pro poker player slammed Westpac for a “totalitarian experience” after his account was blocked following a “very modest” cash deposit, claiming the fraud team refused to unblock his account unless he “adequately explained these funds” which he told them was “none of their business”.

Others have expressed frustration at being grilled by bank tellers when trying to withdraw more than $2000 in cash — a policy intended to uncover money laundering or other criminal activity.

Last month, an Aussie comedian filmed himself giving a series of outlandish reasons why he was withdrawing $6000 in a viral TikTok video.

“Drugs, coke, the devil’s lettuce, you would know,” Jon-Bernard Kairouz told one teller.

 The death of cash

There’s no denying the numbers look bad for the future of cash.

Australian Bureau of Statistics (ABS) data shows a dramatic drop in ATM use in recent years, down from 78 million withdrawals in December 2008 to only 30 million in June this year.

According to the Finance Sector Union (FSU), between June 2017 and June 2022 more than 1600 bank branches were closed, with a disproportionate number located in regional Australia.

Reserve Bank of Australia (RBA) figures show the majority of transactions in Australia are now made using electronic payment methods rather than cash, and cheques are now “rarely used”.

However the use of cash has ticked up slightly after Covid, with an RBA survey finding cash was used in 27 per cent of in-person transactions in 2021, compared with 23 per cent in 2020.

ATM cash withdrawals and banknote deposits have similarly increased from their pandemic lockdown lows.

The pandemic also saw more businesses refusing cash altogether, although cash acceptance remains high overall at 94 per cent in June 2022, from 99 per cent in February 2020, according to the RBA.

“Despite the ongoing decline in the use of cash for transactions, a significant minority of face-to-face payments are still made in cash and some members of the community prefer to use cash for their everyday payments,” the RBA said in its 2022 Payments System Board annual report.

“Older Australians, for example, tend to use cash more frequently on average than people in other age groups.”

The RBA also notes that while Australians are using cash less frequently for transactions, overall demand for cash remains strong.

“The value of banknotes in circulation grew particularly strongly during the pandemic, with circulation growing by 23 per cent from December 2019 to December 2021,” it said.

“Much of the increase in demand was for high-denomination banknotes ($50s and $100s), suggesting that many people in the community continue to view holding banknotes as desirable for precautionary (i.e. emergency) or store-of-wealth purposes, especially in times of economic uncertainty.”

A recent survey of nearly 1100 people by comparison website Finder found 55 per cent of Australians use cash less than once per week, 14 per cent only a few times a year and 13 per cent never using it at all.

“We may never be a 100 per cent cashless society, but any society where you can do 95 per cent of your day-to-day business without cash is as close to cashless as making no odds,” said Finder head of consumer research Graham Cooke.

“With the increasing uptake of plastic across small shops, food vans and even Big Issue sellers, Aussies are finding that the convenience of carrying a card — or just your phone — is preferable to lugging around pocketfuls of coins. This is especially true in Sydney, where you can use the same phone to pay for public transport.”

Mr Cooke warned that this was “not necessarily a positive move”, as many businesses still charge a fee for accepting credit or debit cards “allegedly to cove the cost of the transaction”.

“This, however, ignores the significant costs of handling cash,” he added.

“The UK’s move of banning any transaction surcharges no matter what payment method is used could be the way to go for Australia. For those looking to reduce fees, Eftpos cards are often cheaper to use, and less risky, than credit.”

“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.Bottom of Form


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.”



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Thursday, 13 June 2024

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