Cash is no longer king, but it doesn’t look like going away

Aussies hold more cash than ever before despite rarely using it for shopping, and we shouldn’t expect it to disappear. Here’s why.

Reports of the looming death of cash appear greatly exaggerated.

For years we’ve been hearing that cash is on the way out, that bank branches and ATMs are shutting down across the nation, and that the pandemic accelerated this shift because people no longer wanted to handle germ-infested physical money.

However, an issues paper from the Reserve Bank of Australia says the total value of Aussie banknotes has jumped 20 per cent to almost $100 billion since the start of the pandemic and has doubled in a decade.

In case you’re wondering how this is possible when many of us haven’t bought anything with a banknote since Covid struck in early 2020, the RBA has a few explanations.

Cash remains important for some people who like its privacy, don’t have great internet access, use it for budgeting and paying family and friends, it says.

And cash is increasingly used as a store of wealth, with $50 and $100 notes representing 94 per cent of the total value of cash in circulation. The RBA says this store-of-wealth function becomes more important during financial and economic uncertainty caused by things such as a pandemic.

Holding physical cash is no longer financially punishing. Low inflation means stashing money under your bed at home won’t erode its value much, and banks don’t pay decent interest for leaving it with them.

Perhaps the most important issue driving the cash boom is that crooks everywhere love it. As do many tradies and other contractors who are not fond of reporting all their income to the authorities.

Predicting the future of cash is difficult because it keeps hanging around. Picture: iStock

Criminals’ rising demand for cash is global and interesting. Today we’re often being told that bitcoin and its cryptocurrency friends are the transaction tool of choice for those living outside the law. But crypto is confusing, volatile and much harder to spend than cash.

I used to believe cash would disappear within 10 years. Now I think it will remain with us for decades. Here’s why.

1. SAFETY

The amount of scams and cyber attacks in society today is frightening.

Fraudsters and hackers are constantly targeting our phones and all the technology linked to them, and a huge global hack or shutdown would prompt millions of consumers to shift to the safety and simplicity of cash.

2. PRIVATE PURCHASES

You don’t have to be a criminal to want privacy. Every transaction using a debit or credit card is tracked electronically and your data can be sold to other businesses.

In this electronic spending age, how do you buy a surprise gift for your partner if you share bank accounts? How do you hide an addiction to Lego?

3. HELPING OTHERS

Have you stopped tipping at restaurants, giving out small donations, or lending friends a few bucks when needed?

I’ve noticed my behaviour has changed for the worse because this lack of cash makes it easier to say no, and am now consciously carrying a couple of notes in my mobile phone case.

4. NOSTALGIA

Vinyl records are back. Books never went away. Millions of people are longing for the simpler, friendlier lifestyles of decades ago when you could buy hot chips for a 50c coin.

And cash is still a great tool for teaching young children about money and maths.

Cash purchases will continue to fall, but don’t expect banknotes to disappear.