Last week I marveled at the number of $100 notes in circulation – eight for each man, woman and child in Australia, which is eight more than I ever see.
I suggested that Australians have an extraordinary love affair with cash, which is true. The Japanese and Swiss love it the most, but Australia has about as much cash in relation to GDP as does the United States (which is quite an achievement when you consider how widely US dollars are used) and far more than the UK and New Zealand.
We have the cash - but we appear to be using it less, in the view of Australia’s Payments System Board, which reported this week.
How can we be using our cash less?...
Think about $20 notes. There are only 7 of them per person, but each of us uses those seven notes over and over again. As soon as one leaves my wallet it goes into someone’s cash register and then into an ATM via a bank and back to me to spend again. How fast this happens is an indicator of how much the note is used – what economists call its “velocity of circulation”.
The Board thinks this velocity must be slowing because of the huge takeoff in our use of cashless EFTPOS at supermarkets and the like.
In the past year the value of card-based payments jumped 9.5 per cent, far more than did our total spending. Each of us now gets out a card 240 times a year, up from 130 a decade ago.
But the amount of cash that each of us has lying around hasn’t fallen; in fact it climbed a further 3.9 per cent last year.
Another indication that we are using cash more slowly is that our withdrawals from ATMs - once rocketing ahead - are now growing a good deal more slowly than is our total spending.
But the Board says the truth is it can’t know for certain what we are doing with cash. Unlike cards, cash doesn’t create an automatic record (which is why some people like it).
So in June this year it had Roy Morgan Research ask 1,000 Australians to carry around a pocket-sized diary and note down every single payment they made and how they made it.
670 of them followed through. It’ll examine very carefully the way in which they spent their money.