Consumers hit a high note: $100 in demand

Fifty and hundred-dollar notes are emerging as the denominations of choice in the coronavirus economy with the number on issue surging to record highs.

The $100 note has become a COVID favourite.

Fifty and hundred-dollar notes are emerging as the denominations of choice in the coronavirus economy with the number on issue surging to record highs.

Indeed, the value of $100 and $50 notes on issue has steadily increased over the last six months, according to Reserve Bank of Australia figures, while the number of new smaller notes in circulation has remained relatively flat, with $5 and $10 notes actually falling.

The shift comes as the coronavirus crisis accelerates the tapering off of physical cash transactions in the hospitality and retail sectors while the number of online, card or digital wallet transactions continues to grow.

In June there were a record $40.4bn worth of $100 notes in circulation, up 12 per cent on the year.

At the same time there were $43.6bn worth of $50 notes which was up 14 per cent.

There were $3.3bn worth of $20 notes in June.

While this was up 9 per cent on the year, it was down on the month.

There were $1.3bn worth of $10 notes and $1bn of $5 in circulation; both were flat on the year and down on the month.

AMP Capital chief economist Shane Oliver suggested that people using tradespeople for home repairs or renovations could be paying in cash to keep their costs down through the period of uncertainty, which could be helping to drive the demand for larger bank notes.

“It may be a sign of people engaging more in cash transactions rather than paying tax, the motivation being to save money, both for the tradesperson and the individual.”

Dr Oliver said an increase in criminal activity could also be helping to drive demand for larger bank notes, given that historically criminals use larger notes, though he said that would be hard to prove.

Another reason for a larger number of higher value notes could be that people were hoarding cash, which would be easier to store in larger denominations, but there had been no sign of people taking money out of the bank because bank deposits had also gone up in recent months, he noted.

“You would expect more cash in the system simply because the RBA is undertaking quantitative easing which I think even they would tell you there’s an element of printing money in that,” Dr Oliver said.

In terms of the lower value, Dr Oliver noted that a lot of retailers and individuals had not wanted to exchange change cash with each other for fear of getting the virus, “so there’s been an increase in electronic transactions relative to those using cash, and that would suggest less demand for cash,” he added.