If you’re not currently in possession of at least $3,000 in cash, someone else has your share.
- Nearly half of Australian cash is stored in $100 notes
- ‘Kermits’ are associated with criminal enterprise
- There is also a suggestion to remove $100 notes one year and $50 notes the next
That’s not how much money you have stored in bank accounts. That’s in notes.
The Reserve Bank says there is currently more than $75 billion worth of Australian cash in circulation.
Nearly half of that is stored in $100 bills — so each man, woman and child should on average have 14 of the notes affectionately referred to as kermits.
Now, some of those notes are stored offshore. A means of storing value by people who trust in the security of Australian money.
But shadow assistant treasurer Andrew Leigh said a lot of them were being used by criminals, and Australia should consider ditching the kermit all together.
“We do know that those high denomination notes are particularly favoured by drug dealers and human traffickers,” he said.
University of New South Wales economist Richard Holden agreed.
“They’re a vehicle for tax evasion and they’re a vehicle for illegal activities,” he said.
“One of the main reasons people hold $100 bills is to hide them from tax authorities.”
He said doing away with the $100 note would be a great way for the Government to start to refill its depleted coffers.
“Some very credible estimates said if you got rid of all cash in Australia you would boost tax revenues by about $6 billion a year or more,” he said.
“So if you got rid of the $100 bill you might boost revenues by half of that.”
It might seem like a big move, but it has been done overseas.
Push to consign the $50 note to history
The Indian Government abruptly announced in November 2016 it was withdrawing its two biggest denominations in order to deal with the black economy and starve criminals and tax evaders of funds.
There was major disruption caused by the unexpected announcement which took immediate effect, but Mr Holden said the same could be done here, although in a much longer and smoother process.
“The $100 bill could be gotten rid of in just a year. Just announce it, say hand them in for full convertibility, and after a year it’s no longer legal tender,” he said.
But he would not stop with just the $100 bill.
“I’d knock out the $100 bill in year one and the $50 bill in year two,” he said.
“That accounts also for nearly 50 per cent. Between them, they account for nearly 93 per cent of the value of all currency.”
Dropping the $50 is more controversial.
Although the RBA has suggested it thinks $50 bills are more popular with criminal syndicates — partly because $100 notes are more conspicuous — it has also pointed out that $50 bills are used much more commonly for purchases.
In its interim report, the Treasury’s Black Economy Taskforce noted: “While the use of cash as a means of payment has been declining, overall demand for cash in Australia has been rising, particularly for high denomination notes.”
But it also said: “There is limited data on the use of cash for transactions and other purposes, including as a store of value and to facilitate illegal activity.”
There is still a future for cash
The taskforce’s final report of has been given to the Government, although it is not publicly available.
Revenue and Financial Services Minister Kelly O’Dwyer’s office said the Government was considering the recommendations but would not say if it was considering ditching the $100 bill.
Mr Leigh said more needed to be done to clamp down on the estimated $25 billion black economy.
“Firms that are living in the shadows, that aren’t paying their fair share of tax, might benefit from a heavy cash economy, but they do so at the expense of honest small businesses,” he said.
The death of the $100 bill might be closer with the launch of the New Payments Platform Australia, which chief executive Adrian Lovney says will mean electronic money transfer “in less than a minute in 99 per cent of cases, between participating bank accounts, 24 hours a day, seven days a week” that should dent the comparative speed advantage money currently enjoys.
But he says it will not be the preferred payment system for those operating in the black economy.
“I think by definition any transaction that occurs between two people that have a bank account or a credit union account is not going to be anonymous, so for those people I think cash will continue to be the thing they prefer to use,” he said.
Cash will continue to be used for now, but the days of the kermit might be numbered.