Thursday, September 13, 2007

More $100 notes than $20 notes?

Tell me this isn't true:

Take look inside your wallet or purse.

How many $20 notes, how many $50 notes and how many $100 notes do you see?

If you see mainly $20s, a few fives and tens and perhaps one $50 note I suspect you are like most people.
But not according to the Reserve Bank. Each year it tots up the total number of notes in circulation for its annual report.

The latest released yesterday shows that we hold three times as many $50 notes as we do $20 notes. Per person we hold five $5 notes, four $10 notes, seven $20 notes and an astounding eighteen $50 notes.

Of course many of these notes are not held by people but in cash registers and ATMs – which help explain the large number of $50 notes. Most ATMs are configured for $20 and $50 notes.

What’s more surprising is the very large number of $100 notes, a denomination not widely used ATMs...

The Bank’s figures show that there are now more $100 notes in circulation than $20 notes - a surprising result given the contents of most of our wallets: eight per person as opposed to seven.

Part of the explanation may involve the Y2K scare in the lead-up to the year 2000. The Bank says it printed and distributed a large number of $100 notes in the lead up to Y2K to help people and businesses prepare for the eventuality that they might have to use cash rather than computers.

But the figures in its report show that these $100 notes were not returned. In fact there are many more $100 notes in circulation now than there were back then.

There is evidence that many of them do not change hands. The Bank reported in 2001 that so few soiled $100 notes were returned for replacement that on average each would last 70 years. By contrast each $50 note would last only 25 years.

One likely explanation for the preponderance of unseen, unsoiled and apparently untraded $100 notes is that most remain wrapped up in bundles in briefcases, traded only in bulk and nefariously. When not traded they are hidden under floorboards and in roof cavities away from the eyes of the authorities.

The Good and Services Tax, introduced seven years ago, was intended to kill the black economy. The latest Reserve Bank figures suggest that it remains alive, if well hidden.