Banknotes grow not old, they just wear out

Personal wealth may not last forever but a $100 note just might, the RBA says.

The RBA says $100 notes are primarily used to store value, meaning they don’t wear out often. Picture: iStock

How long does a $5 or $10 note last? Around five years according to a new study by the Reserve Bank.

Indeed the bank has found the higher the value of the note, the longer it generally lasts.

The central bank, which oversees the production of the nation’s polymer notes, said lower value transactions means lower notes are used more often, but people tend to sit on higher value notes for longer periods of time because they are storing value.

This means the $20 note lasts for 10 years on average and the $50 banknotes last for 15 years, on average.

As $100 banknotes “are overwhelmingly used for store-of-value purposes” they tend not to wear out, the RBA concluded.

The findings come ahead of the release of the new $20 polymer note next month, which will have the same new anti-counterfeiting elements as the previously released $5, $10 and $50 notes.

In a research paper released with the RBA bulletin on Thursday, the central bank said that banknotes were exposed to two types of hazards: mechanical damage, which occurs randomly; and inkwear, where the printing on the note eventually wears away with use.

“The life and death of a banknote is analogous to the life and death of a biological organism,” the research paper said.

“From the day it is issued, a banknote is subject to a set of random mechanical hazards.

“Banknotes presenting with staples, stains, holes or tears, to name a few, will be deemed unfit and destroyed by the bank.

“But those that evade the many mechanical hazards that exist in circulation may have a long life.

“For these banknotes, the end of their useful life can occur either through an accumulation of inkwear, or because the series they belong to is eventually retired.”

The RBA said in the natural world, lifetimes are measured in years.

“This is also typically how most people view the age of a banknote,” the RBA said.

“But banknotes do not age per se, they wear.”

The RBA also noted that demand for banknotes significantly increases during economic events such as ahead of Y2K or the Global Financial Crisis, which resulted in each individual banknote being used less and so higher banknote life, despite an overall increase in transaction demand.