The future of cash is up in the air as new $50 note released

You will soon see new $50 in your wallets — that is, if you’ve got anything to do with cash any more.

The Reserve Bank last week started releasing the updated notes that include WA’s own Edith Cowan, the first woman in an Australian parliament, and excerpts of her first speech.

It follows updated $5 and $10 notes over the past couple of years as the Reserve attempts to get in front of counterfeiters who were starting to make some headway against the older notes.

By 2020 the full suite of notes, including the $20 and the rarely seen but greatly held $100, will be rolled out.

The question is, however, will we need another update to currency in 20 or 30 years time? Will our days of cash in the pocket, capable of withstanding a washing machine visit or two, be over?

The future of cash really is up in the air.

NAB has just released some insight into our changing use of cash and that points to younger generations rapidly embracing new technologies that could see notes go the way of a cheque.

For instance, NAB found 23 per cent of 18 to 29-year-olds use their debit cards to pay for purchases of less than $5. Just 6 per cent of those over the age of 50 get out a card rather than a note to buy a chocolate bar.

On the other side of the equation, 54 per cent of youngsters use cash to make that $5 purchase compared to 88 per cent of those over 50.

Across all types of purchases above $20, younger people will go to a card. Up to 10 per cent will use a smartphone while between a fifth and a third use a credit card.

That’s not to say that notes are disappearing.

Last year Note Printing Australia, the RBA-owned company that makes our notes, delivered 227 million of the buggers to the Reserve Bank that then went out to the nation’s commercial banks.

Of that, 184 million were those new $50 notes — or about seven for every man, woman and child.

One of the interesting trends of recent years has actually been the increase of cash technically in circulation in this country and many others.

Since the global financial crisis, the amount of cash in wallets or stuck under a pillow has grown. The value of the cash in circulation is a touch over 4 per cent of GDP although through 2017-18 the rapid growth of recent years did come off.

If we’re turning to cards to make more and more payments why is cash increasing?

In its recent annual report, the RBA made this point about cash versus electronic payments.

“While the proportion of payments made using banknotes is in decline relative to electronic payments, the number and value of banknotes on issue continues to rise, highlighting their continued importance as a store of value as well as a payment mechanism,” he said.

And nothing, apparently, is more a store of value than a $100 note.

Well, not really. A $100 note from 2010 is worth $100 today. But once you take into account inflation, while you could buy $100 worth of goods back in 2010 with that note, today you’ll only get $84 worth.

There’s a few other things going on, and it’s occurring globally. Again, since the GFC, the number of high-denomination notes both here and overseas has grown. The RBA earlier this year noted that $100 demand soared from around 2008. The same trend occurred in other nations including Britain and Canada.

Some of it has been due to more general use. The Reserve has found that banks are starting to put $100 notes into their ATM networks with some noting that there is more demand for high denomination notes in “areas with large migrant populations”.

Periods of high financial instability, such as during the GFC, drive more use of big notes.

Travellers tend to take big denomination notes when heading to another country. Given we’ve got record numbers of people travelling into Australia (and tourism globally is soaring), that demand by tourists accounts for more demand.

And then there’s that issue bankers don’t like to talk about but is clearly an issue. Crime.

Criminals love high-denomination notes because it’s much easier to move a suitcase of $100 notes than a crate of $20 worth the same amount.

Don’t believe me?

In late 2016 the then Turnbull government announced the creation of a Black Economy Taskforce. It signalled early that the future of the $100 note might be on the table as it sought to target both criminals and people who try to avoid the tax system.

Demand for $100 notes fell sharply, the RBA notes, on the back of the taskforce’s creation.

And daily deposits of $100 notes increased sharply. Some of that was done by people who worried their $100 might be worth less in the future with deposits up almost everywhere, particularly in capital cities.

But, clearly, some crims decide to bank their cash.

In response to the taskforce’s report, the Government has sought more information from the Reserve about the use of both the $100 and $50.

Given the wider trends of debit cards, smartphones and direct deposit, a crackdown on high-denomination notes, because of the trouble they can cause to law enforcement agencies, would just accelerate the demise of cash.

In the mid-1990s there were close to 50 payments via cheque per capita in this country. By 2016 this had fallen to fewer than five. Between 2015 and 2016 the number of cheques written in this country fell by 20 per cent. Cheque use is falling at an accelerating rate.

They may not have gone the way of shells but the cheque’s days are numbered.

In Sweden, the value of currency on issue has fallen to just one per cent of GDP. Many major banks no longer handle cash as Swedes are expected to pay for everyday goods with cards and smartphones.

It hopes to make the country effectively cashless by 2023.

We’re not there yet. But enjoy the new $50 note for as long as you can. We may not see a new one for a very long time, if ever.