Coin use is down but are Kiwis storing large cash notes?

One and two-dollar-coins are declining, card use is up, but despite this, the circulation of big notes continues to rise, the Reserve Bank says.   

The decrease of smaller denominations is usually associated with the increase of electronic transactions; however, the paradox is that despite Kiwis having moved towards a more cashless society, they are increasing their use of $50 and $100 notes. 

This indicates that New Zealanders are either storing cash savings themselves or potentially using it for under the table transactions in a shadow economy. 

Aside from the increase of cash circulation potentially relating to criminal activity or cash jobs, there are also those who do use cash as legal payments. 

Reserve Bank data shows that 11% of adult New Zealanders use cash every day and around 38% of adults use cash for payments at least three times a week. People aged over 60 account for 41% of the population making cash transactions, according to The Reserve Bank’s survey.  

New Zealand still has one of the smallest amounts of cash in circulation (CIC) per capita in the OECD though and the Reserve Bank only knows where around 25% of the cash is. 

A move toward a cashless society doesn’t work for everyone though – the Reserve Bank report says that  if less cash is used or available in the future it could be harmful for the people that face barriers within traditional banking. 

Elderly citizens, people who don’t have proof of address or those with criminal convictions or poor credit history or limited access to digital channels and the internet could be excluded from the financial system. 

4% of people surveyed by the Reserve Bank in 2017 had used cash only within the previous week and most of those people were over the age of 60. 

Meanwhile, The World Bank has estimated that 1% of New Zealand’s population doesn’t have a bank account.   

Cash is important within the international tourist market and within the four Pacific islands (Cook Islands, Niue, Tokelau and Pitcairn) that also use New Zealand currency. 

The only two advanced economies in the world that have experienced full decreases in cash circulation are Norway and Sweden.  

This is partly because bank branches and retailers in these countries are less likely to accept or issue cash and there is very little tax evasion or shadow economy operating there. 

Retailers in New Zealand could benefit from cashless payments when it comes to physical on-site security, spending less time on bookkeeping and potentially lower insurance costs; however, they would potentially lose sales from customers who want to pay by cash, especially from tourists. 

“Cash gives privacy and freedom to spend that other payment methods do not, and its ability to back-up other payment methods in a crisis also needs examination. 

“The potential consequences of cyber threats at national and personal levels might also be elevated with less cash around,” the RBNZ said in its Financial Stability Report. 

The Reserve Bank is currently looking for feedback from New Zealanders to seek their opinions on the future of cash use in the country.   

The survey can be completed on the Reserve Bank website.