March 2021 – It’s a paradox: the use of cash dropped during the COVID lockdowns of 2020, but demand for bank notes rose.
The rise in demand for cash can be shown in the chart below. The Reserve Bank of Australia (RBA) attributes it to people wanting to hold cash in an emergency, noting the jump in demand for ‘real money’ began in mid-March 2020, around the time that lockdowns were imposed.
It says citizens may have wanted to hoard cash in case of bank systems breaking down. The RBA went back to recessions in the 1960s, 1970s and 1980s and the dotcom boom to find that demand for cash rises in times of economic uncertainty.
The value of banknotes in circulation grew by 17.1 per cent over the year to February 2021, reaching $97.3 billion. This compares with average annual growth in banknotes outstanding of around 5 per cent over the previous decade, says the RBA in a study.
Around 70 per cent of the volume of banknotes issued since mid-March 2020 were $50 notes and almost 20 per cent were $100 notes. Apart from people being in lockdown and businesses closed, many retailers don’t welcome receiving a $100 when they have to hand back a load of change.
The RBA notes there has been little issuance of low-value notes during the pandemic as consumers can’t spend in person and merchants don’t need to hold change.
The use of cash for payment has been in a long decline, from 69 per cent in 2007 to 27 per cent in 2019 and as we move out of lockdowns, more retailers are not accepting cash payment.
The RBA notes it received a small number of inquiries about the virus risk around handling cash (it recommends good hygiene).
More people moved to online purchases during the pandemic lockdowns and it is widely assumed that this will continue. Only time will tell. It will also be interesting to see if people start spending their cash hoards now that we can move about more freely. Interest rates aren’t forecast to rise for a couple of years but, until then, there isn’t much incentive (apart from risk of robbery) to returning cash to bank accounts.
The COVID-19 pandemic is taking its toll on the nation’s retirement savings. More than 2.4 million people applied to withdraw money from their superannuation fund between April 20 and June 21, 2020 under the COVID-19 Superannuation Early Release Scheme.
Super funds paid out $17.1 billion, an average of $7492 per person, according to data provided by 177 funds to industry regulator the Australian Prudential Regulation Authority (APRA).
A second run of applications will be made in the first week of July. Processing time is likely to take two weeks. APRA is releasing a weekly update on the scheme.
Concerns are being expressed that COVID withdrawals mean people are eroding their retirement savings and will suffer in their senior years.
At the end of March superannuation funds held a total $2.7 trillion in assets. This had fallen 0.3% in value on the December quarter due to COVID-related losses.
I last wrote a cheque for $15 in May 2018 for cat registration and before that I hadn’t written one since 2016.
Reserve Bank of Australia Asst Governor Michele Bullock says the banking industry is discussing closing down the cheque system as consumers move to cards and online payment and financial institutions use electronic transfers. The chart tells the story.
The cost of insuring property in Northern Australia – battered by cyclones every year – has seemed an insurmountable problem since premiums jumped around eight years ago.
Householders and business
complain they can’t afford to insure their properties while insurers say the
risk of loss is high and they have to price for it. Some insurers have left the
market, deliberately priced themselves out of it or stopped taking business
when their exposure reaches a certain level.
The Australian Competition and Consumer Commission (ACCC) says insurance markets in northern Australia are characterised by “high prices, high costs and low profits”.
The Commonwealth Ombudsman has called for
private education providers to be clearer on fees with international students
who have pre-paid for courses.
The Ombudsman investigates complaints by
international students against private providers and says the most common
complaint is from students wanting pre-paid tuition fees refunded before they
have finished their course.
“Students’ ability to seek this refund should be stated in
their written agreement with the provider,” it says.
In the 2016-2017 tax year, Australians donated $3.5 billion to charity.
The actual figure will be higher because the figure above comes from tax returns lodged with the Australian Taxation Office (ATO). Not everyone lodges a tax return and many people make donations but don’t claim for them. There is also all the time donated by volunteers who work in op shops, environmental projects and sit on committees such as kindergarten and school councils.
The ATO notes that for those who did donate, and who it recorded, the average donation was $770.
“The most generous state was Western Australia, with 30% of residents claiming an average deduction of $1,190,” it says.
This is possibly because some very wealthy Western Australians donated large amounts.