While day-to-day banknote use is declining, a new report has revealed the most popular (and surprising) way Australians still use their cold, hard cash.
The Reserve Bank of Australia’s (RBA) Understanding the Post-pandemic Demand for Australia’s Banknotes revealed the value of banknotes in Australia grew by 22 per cent, or $19 billion, during the pandemic.
Although demand for banknotes has dropped as cash is less likely to be used in day-to-day purchases, it “remains close to its historical high”.
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“This strength, relative to growth in prices and the economy, is despite the ongoing decline in the use of cash for day-to-day transactions over many years,” the report observed.
But rather than spending it, the RBA’s latest report revealed the most common way Australians use their cash is to actually stash it away.
Hoarding banknotes is usually done for “store-of-wealth or precautionary motives”, the RBA said.
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Taking into account several pieces of data such as fire-damaged banknote claims and wholesale currency shipments to and from Australia, the RBA estimates that of the notes in circulation in June 2023, about 55 to 80 per cent were hoarded.
The total value of these hoarded banknotes is between $56 billion and $81 billion.
“This share has grown since the onset of the pandemic by around five percentage points, which indicates that much of the increase in banknote demand over this period was for hoarding purposes,” the RBA said.
In comparison, about five to 9 per cent of the banknotes in circulation in June last year were lost, destroyed or forgotten about.
Of those, $5 and $10 notes were the most likely to be lost, which the RBA said was most likely because people take less care of banknotes with a lower denomination.
Banknotes of a higher value, $100 and $50, are the next most likely to be lost, largely because they are often used for hoarding purposes and hence may eventually be forgotten about.
When it comes to using cash in the traditional sense, that is for day-to-day purchases, about nine to 26 per cent of notes currently in circulation are used for this purpose, with another seven to 11 per cent used in the “shadow economy”.
“The estimated share of banknotes used for transactions has declined by around five percentage points since the onset of the pandemic and is consistent with the decline in cash payments,” the RBA said.