The $100 note is safe for now

[Hercules]

From pp. 49-51 of the Black Economy Taskforce's final report:

The $100 Note

The RBA has supported our recommendation for a study into the use and disposition of the $100 note. This reflects the fact relatively little is known about this subject. During our consultations, a wide range of hypotheses were offered. Some believed that pensioners had stocked up on $100 notes to avoid being hit by the pension assets test. Others claimed a large volume of notes are held offshore, including by people with little confidence in local banking systems, or as a currency hedge. Others argued they were mainly used at wholesale markets and in casinos. None of these explanations completely satisfied us.

We are not yet calling for the abolition of cash or the banning, reissuing or restriction of $100 notes. Cash will remain a part of our payment system for the foreseeable future, albeit a declining one. Given the societal trends in cash usage and preference, and the emerging innovations in payment systems there may not be a need to take action on the $100 note in the future, indeed there may not be a need for the note itself. It is worth noting that the Australian $100 note is relatively low-value compared to other high-value banknotes that have been subject to demonetisation processes internationally — for example the $10,000 SGD, $1,000 CAD and the €500 EUR.

Despite being the second most common banknote in circulation — approximately fourteen $100 notes in circulation for every Australian — with average growth of about 8 per cent per year since 2011, the $100 note is not widely used by Australians for everyday transactions; rather it is the $50 note, the most common note in circulation, which is preferred for daily transactions. Suggestions have been made that the $100 note primarily serves as a store of value, both domestically, including by individuals seeking to avoid asset and welfare tests, by tourists intending to visit Australia and by international banks and investors seeking to hedge against other currencies. These views have been supported by anecdotal evidence presented to us.

It has also been suggested that the $100 note is used primarily to facilitate illegal transactions. While there is no doubt that the existence of the $100 note does facilitate some amount of illegal activity it is not clear the extent to which it does so or to what extent action against the $100 note would curtail these activities. Evidence presented by law enforcement agencies suggests that criminals are more likely to transact using the $50 note given its wide acceptance and ubiquitous use in legitimate transactions. It is also the $50 note that is most often counterfeited. This widely available near perfect substitute illustrates that potential action against the $100 note would need to take account for other stores of wealth and likely behavioural responses.

Regardless, because of public concern and lack of clarity regarding the $100 note, we have examined closely a range of possible reforms to high-value banknotes, including options to ban, restrict or trace these notes. What became evident in trying to evaluate the likely effect of any specific action against the $100 note is that there is little hard information on the role that high-value notes, in particular the $100 note, play in the modern Australian economy. This makes it difficult to be definitive about the likely effects, economic, commercial and social, of any action on the $100.

This leads to an obvious question, how is the $100 used in the modern Australian economy and to what extent does it facilitate black economy activity?

To determine if there is justification for any specific policy action in the future there will need to be an understanding of these issues. To address this, we are recommending, with the support of the RBA, that a research study be undertaken to determine the use and disposition of high-value banknotes in the economy and their specific role in facilitating black economy activity. This will better inform policy makers in the future to make effective policy in this space without imposing significant unintended consequences on the operation of the Australian economy.

Observation: A Continuing Role for Cash

While cash facilitates under-reporting income and facilitates criminal transactions, getting rid of cash would not get rid of crime or of under-reporting of income: illicit operators would move to some other form of payment, probably more than one form.

Rather than ban cash, which after all is a key part of our payment system and convenient and accessible for many, it is more important to constrain the use of cash in the areas where it is most abused, such as high-value transactions.

This narrows the scope for dishonest people to hide transactions and to hide what their real income is.



From pp. 73-76 of the Black Economy Taskforce's final report:

Recommendation 3.6: Gaining a better understanding of the use and role of high-value banknotes

The RBA should undertake research, in conjunction with government agencies, financial intermediaries and others, to develop a better understanding of the use, role and location of the $50 and $100 notes.

Description

The Government should have a better understanding of the use and role of high-value banknotes. The RBA should work with:

• government agencies, particularly the Australian Transaction Reports and Analysis Centre (AUSTRAC), regarding sharing of information about banknotes being taken overseas;

• financial intermediaries regarding offshore demand for banknotes; and

• high users of banknotes domestically, such as casinos and post offices.

Objective

• Develop a robust understanding of the use of large value Australian banknotes in both the domestic and international economy.

Discussion

The $100 note is relatively infrequently used for day to day transactions, but at the same time represents a large proportion of currency in circulation by value and number. However, there is relatively little reliable information available about how the $100 is used.

The use of cash, particularly high-denomination banknotes, has attracted attention as a way to avoid reporting income to the authorities, or to finance illicit activities. It is speculated that high-denomination banknotes are also a useful vehicle for black economy activities such as making payments in cash to avoid tax or the loss of pensions or welfare benefits. Some use the $100 note as an anonymous store of wealth to avoid asset and other means-based tests. Particular criminal operations (for example money laundering) also prefer cash, owing to its anonymity and its ease to store and transport.

However there are also many legitimate uses of the $100 note. For example, it is believed that some high-value banknotes are used as a store of value, including by people located overseas who are seeking to hedge against their local currency or within particular migrant communities where trust in banks and government may be low. Macroeconomic factors such as low inflation and low interest rates can increase the relative attractiveness of Australian currency as a store of value. This has been particularly evident in times of economic and financial uncertainty, such as the 2008 Global Financial Crisis. However the extent to which this accounts for the relatively low level of use of the $100 note as a means of everyday transacting is unknown.

Given the clear knowledge gap, developing a better understanding of how high-value Australian banknotes are being used will support the Government's economic and monetary policy objectives. A stronger understanding will also assist regulatory and law enforcement agencies to mitigate risks posed by the use of high-value banknotes to facilitate illegal or black economy activity.

Other options considered

1. Remove the $100 note from circulation

While a number of jurisdictions have taken the approach of decommissioning high-value banknotes they have tended to involve a variety of country-specific factors — hyperinflation or involve denominations that have been of considerably higher value than the Australian $100 banknote. In the case of India, the banknotes were replaced with even higher denominations.

In this context, we note that in Australia, $100 is considered to be a small enough value for credit card payments without PIN or signature verification (for example, tap-and-go payments).

Arrangements would need to be made for individuals holding old series banknotes to exchange them for alternative denominations. This would imply significant additional compliance and transportation costs for legitimate holders.
While this may temporarily disrupt some black economy activities, this would be unlikely to have a permanent impact. Substitutes are readily available (such as the $50 note or foreign currency).

2. Implement technology to track $100 banknotes

Currently available radio frequency identification technologies are not suitable for use in currency. Simply put, they are thicker than Australian polymer banknotes and may not be sufficiently robust. Considerable research would be needed to develop a suitable mechanism. This could be at some cost and may have extensive lead times. Given the likelihood that black economy participants would turn to lower value banknotes, use of similar technologies in other Australian banknotes may also need to be considered.

Given the anonymity of cash, for tracking to be effective, there would be a need to connect the user of the banknote with its identifier, through POS technologies. This does not currently exist and would also need to be developed. This would involve considerable expenditure.

3. Include expiry dates on $100 banknotes

Under this option, the $100 banknote would have an expiry date, after which it would no longer be able to be used and would need to be exchanged. However, the potential costs of such a proposal would likely outweigh its benefits in curbing black economy activities. For example, it would imply a need for expiry dates for all Australian banknotes, as black economy participants would substitute $100 for other denominations.

Expiry dates would also increase the compliance cost for currency holders, who would need to monitor them and make arrangements to redeem them at a future point. This would be compounded should the range of banknotes including expiry dates be expanded. As highlighted in the previous options, the logistical and financial impost on the community would be considerable.

Introducing an expiry date for any Australian banknote would be an unorthodox approach for an advanced industrial economy with a stable monetary system and central bank that commands the confidence of the community. Such an option has only been considered in extreme circumstances such as during the period of hyperinflation in the 2000s where the Zimbabwean dollar currency took the form of a time-limited bearer cheque.

International experience

Internationally, there have been some moves to change the mix of banknote denominations. The motivations for these changes have differed between countries; to eliminate counterfeiting problems, to address issues associated with high inflation, to making it more difficult to use cash for black economy purposes. Notable examples include:

• Canada's $1,000 banknote was decommissioned in 2000.

• Singapore stopped issuing a $10,000 banknote in 2014.

• In late 2016 India announced it would demonetarise its highest denomination and would replace them with a banknote of higher value (the INR 1,000 was replaced with the INR 2,000). By necessity, the demonetarisation in India occurred over a very short time period, which was reported to have resulted in considerable hardship.

• The European Central Bank (ECB) announced it would end production and issuance of its EUR 500 at the end of 2018 (although these banknotes would remain legal tender).

At the same time:

• The ECB announced that it will continue to issue EUR 200 banknotes.

• The Swiss indicated that they had no plans to demonetise their highest denomination, the CHF 1,000.

Stakeholder views

On balance, submissions and consultations did not support action against any specific banknotes.

Implementation considerations

If it is deemed to be useful, this research could occur on a regular basis. The Next Generation Banknote program also provides an opportunity to gather information about the use and store of high-value banknotes. The RBA should consider how best to capture information throughout this process.


Source: https://static.treasury.gov.au/uploads/sites/1/2018/05/Black-Economy-Taskforce_Final-Report.pdf

[Mister T]

I'm surprised some actual research was done. Still, sensible outcome.

[Hercules]

I'm surprised some actual research was done. Still, sensible outcome.

I'm very relieved. Any other decision would have been an attack on the Australian numismatic community, not to mention our fundamental rights as Australian citizens.

[serenitystan]

Where have all the hundreds gone, long time parting. Where have all the hundreds gone, gone to drug dealers everywhere..When will they ever learn,when will they ever learn.

[gweidion]

I'm surprised some actual research was done. Still, sensible outcome.

I'm very relieved. Any other decision would have been an attack on the Australian numismatic community, not to mention our fundamental rights as Australian citizens.

I know this is an old post but is everyone aware that the government plans to ban transactions in cash over $10,000 next January?
It was going to happen a couple of months ago but they put it back to "the quiet time" to slip it past the public.

This is precisely an attack on our fundamental rights to distrust the banking industry and the government.

I'm in the process of buying a new car and the dealer won't take cash over $2000. That is pathetic as far as I am concerned.

[Mister T]

Anyone seen any 2017 dated $100 notes yet?

[Triggersmob]

The $100 notes are still out there circulating. I do the banking at work,
and I would bank one or two each day. Not a large amount, but as the
article above said, the $50 note is the preferred note.

[Mister T]

A family member got a 2017 $100 note recently.
Are the new ones due out this month?

[gweidion]

I got about a dozen 2017 ones from the Commonwealth bank a few weeks back including about ten last prefix ones in perfect uncirculated condition which saved me heaps in trying to collect some for my collection.

The RBA's serial number issues website is a bit lacking with the last data being 2018. I suspect the new $100 will be next month but usually by now Downies and others (Australia Post etc) are offering pre sales of collectors folders. Seeing nothing in regards to those.

[Mister T]

I saw a couple of 2017s today.

And yeah I thought we were due the new $100 note this month - I'm sure the new $20 note was last September.

[Triggersmob]

I thought the new one was coming this month too.

[Nevol]

This site says "late 2020"

https://banknotes.rba.gov.au/banknote-features/#-new-hundred

[gweidion]

Got an email from Note Printing Australia or whatever they call themselves these days.

Good afternoon
To mark the launch of the new $100, the Reserve Bank will be making two commemorative products available to the public for purchase:

·         a 'Next Generation of $100' commemorative folder containing one new $100 banknote at a recommended retail price (RRP) of $128.00

·         a 'Two Generations of $100' commemorative folder containing one existing series $100 banknote and one new $100 banknote at a recommended retail price (RRP) of $252.00
Both folders contain standard uncirculated banknotes

They go on to talk about wholesale purchase. Registering as a wholesaler turned out to be near impossible.
They finish saying...

Further information about the new banknotes can be found on our website (www.banknotes.rba.gov.au) or by contacting us on 1800 633 220.

No dates were mentioned in the email but based on previous years you could buy the folders from Downies and Australia Post plus other dealers but can't recall which ones.

[Mister T]

Did the email say what year will be in the two generation folder?

[gweidion]

Did the email say what year will be in the two generation folder?

Well it is titled Numismatic Sale 2020 [SEC=OFFICIAL] so I assume it isn't like the Olympics.