New report: Cash is NOT in decline
Existing published data underestimates the role of cash in Australia’s economy. The Reserve Bank of Australia’s triennial Consumer Payments Survey (CPS) reported that physical cash’s share of consumer payments has fallen dramatically to 13 per cent in 2022 (16% for in-person payments) down from 27 per cent in 2019.
This number has been widely reported in the media but significantly underestimates the role of cash in the Australian retail payments market. The RBA’s CPS was conducted in November 2022, a time still impacted heavily by the COVID pandemic and restrictions on movement.
There are more ATM cash withdrawals per month NOW than when the RBA CPS data was collected and there is more cash circulating in the economy NOW than November 2022.
The World Health Organization declared a pandemic on 11 March 2020. This declaration lasted more than three years, until 5th May 2023.
The RBA’s Consumer Payments Survey was conducted in late 2022, while many COVID related health orders were still in place. The World Health Organisation did not lift the pandemic declaration until May 2023.
In Victoria, Public Safety Order Number 4 commenced on 22 September 2022 requiring masking in certain circumstances, social distancing and other measures to combat the spreading Omicron variants. This Statement of Reasons published by the Victorian Department of Health in September 2022 is a reminder of the fear and danger that gripped the community and policy makers at the time:
“The Chief Health Officer’s advice … indicates that similar waves of cases (similar to that seen in January 2022 and again in July 2022), hospitalisations and deaths are likely in coming months.”
In NSW, Public Health (COVID-19 Care Services) Order (No.3) 2022 remained in force until 30 November 2022. The results of the RBA’s Consumer Payments Survey are clearly representative of COVID-era consumer behaviour.
- The total value of banknotes on issue in Australia has risen from around $60 billion ten years ago to over $100 billion in June 2024.
- The value of banknotes on issue has been trending up over ten years and jumped up during the COVID-19 pandemic period (2020 – 2022).
- In mid-2023, some media commentators declared that Australia had hit ‘peak cash’ and predicted steep falls in the value of cash on issue.
- Over the last 12 months this has not happened. The value of cash on issue has levelled off at the record level of around $101 billion.
- On the 29th May 2024, there was $101.2 billion worth of RBA banknotes on issue in Australia.
New 2024 survey data from YouGov suggests that cash remains popular with young people, with more than half of millennials (born 1981-1996) reporting they like to use cash when making purchases.
Only 27% of very young Australians (Gen Z, 1997 – 2009) say they do not like to use cash when making purchases.
Across all age groups, from Gen Z to Baby Boomers, cash remains more popular than not.
New research from payments app Waave found 71 per cent of Australians are concerned about going completely cashless.
Waave reported that 41 per cent of Australians are “extremely concerned” about going cashless.
Two-thirds say it will exclude people and exacerbate economic inequality, 58 per cent worry about paying more fees, and 42 per cent say they will miss the chance to handle money.
Waave CEO Ben Zyl told The Australian that people liked the feel of money and tended to spend less when paying in cash.
“The psychology around cash is unique,” he said.
“People fear losing the sense of control and visibility over what they actually have.
The research suggests that physical cash is very important to about 40 per cent of Australians who use it daily or very regularly. 41 per cent are extremely concerned about the prospect of a cashless Australia says Waave.
The value of monthly ATM cash withdrawals is up 4.5 per cent in the year to May 2024, reports the RBA. The number of ATM cash withdrawals is up 2.1 per cent in the year to May 2024.
There is no decline in the number or value of ATM cash withdrawals, despite fewer ATMs.
Increasing number of outages and privacy concerns are fueling a trend towards people carrying physical cash ‘just in case.’
The Optus outage in November 2023 and the CrowdStrike outage of July 2024, plus many other smaller system problems have dented community confidence in the reliability of cashless payment systems.
The EcoCash outage in Zimbabwe 2019 killed that nation’s cashless experiment.
The governor of the Reserve Bank advises her own children to never leave the house without cash.
“I had no sympathy for my son when his card didn’t work and he had no cash on him at the petrol station,” Michelle Bullock told the AusPayNet Summit on Monday 12 December.
There’s no possibility of a cashless future because the banks can’t build a reliable, private, free alternative. The industry and regulators need to work together to ensure we can access legal tender when required.