By Shane Wright
The collapse in the use of cash to pay for goods and services is putting strains across the entire payment system, with Reserve Bank governor Michele Bullock signalling major changes to ensure Australians can continue to put dollars in their pockets.
Speaking in Sydney on Tuesday at the Australian Payments Network Summit, Bullock said the distance people had to travel to get their hands on cash might soon start climbing as the number of ATMs and cash access points across the country fell further.
The collapse in the use of cash is now a growing concern for the Reserve Bank.Credit: Gabriele Charotte
She also revealed there were likely to be new laws next year targeting the buy now, pay later system and mobile wallets to ensure costs for consumers and merchants were as low as possible.
Through 2022-23, the total value of cash in circulation fell by almost $1.1 billion. It was the first drop in cash in circulation since Australia moved from pounds to dollars in 1966.
Three-quarters of Australians are now considered “low cash users” while just 7 per cent – mainly older people or those in regional areas – are considered “high cash users” who use actual currency for at least 80 per cent of their purchases.
Bullock, who apart from overseeing monetary policy is responsible for the nation’s payments system, said the share of payments made with cash had fallen from 70 per cent in 2007 to just 13 per cent last year.
She said despite the fall in use, cash was still important as a means of payment for some people as well as a precautionary store of wealth for others. Cash was also an important backup payment during natural disasters or when electronic payment systems were unavailable.
But the sheer collapse in cash usage was creating problems for the payments system.
“The challenge we face is that as the transactional use of cash declines, it is affecting the economics of providing cash services and putting pressure on the cash distribution system,” she said.
Earlier this year, the Australian Competition and Consumer Commission approved the merger of the nation’s two largest cash transport companies, Linfox Armaguard and Prosegur.
Reserve Bank governor Michele Bullock says people may have to travel further to access cash.Credit: Wolter Peeters
But Bullock said Linfox Armaguard had now indicated its business was unsustainable as cash usage continued to fall.
She said many countries were facing the same issues, with one option being the creation of a single co-operative part-owned by a number of different organisations that would be responsible for cash movement.
“There has been a range of policy and legislative responses contemplated overseas, including measures to maintain cash access and acceptance, and to shore up wholesale cash distribution arrangements,” she said.
“We continue to closely monitor developments overseas, though the diversity of policy options being considered suggests that solutions tailored to Australian circumstances will be required.
“It may be worth exploring the merits of a co-operative model in Australia.”
Bullock said another issue was access to cash, especially in rural and regional areas.
“The declining use of cash is also challenging the provision of retail cash services. This has been evident in the significant reduction in the number of cash access points over recent years, including ATMs and bank branches,” she said.
“Despite this, the distance people need to travel to access cash services has been little changed in recent years. But this may not be the case in the future if access points continue to decline.”
Bullock said new payment systems were likely to require their own laws in the next year.
She said while mobile wallets had grown in use, the costs associated with them remained “opaque” while possible competitors faced barriers to access.
The use of buy now, pay later had also grown.
Bullock said merchants should have the right to surcharge these services because they were expensive to provide, adding there might be formal regulation required to allow this.
Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.