The mystery of Australian banknotes


As we are completing more and more transactions with credit cards, online banking or payments, and increasingly apps, cash loses its place in our wallets and our lives. For young people, in particular, less than a third of purchases and payments involve coins and notes. Yet the cash – like truth – is still out there, and in large quantities. As the Reserve Bank of Australia governor Philip Lowe says,

“All up, there are 14 $100 notes on issue for every Australian, 30 $50s, and seven $20s. That makes for around $3000 worth of banknotes on issue for every Australian.”

The total is some $76 billion in notes in circulation. Personally, I have zero notes at the moment, and I suspect most of my Australian readers would have a handful at most (if any of my non-Australian readers have any Australian banknotes, please return them to Australia, care of the Daily Chrenk). So who’s got all “our” notes?

It’s a difficult business trying to trace plastic (or paper in most other parts of the world) money, so the Reserve Bank can only give some broad estimates:

  1. around 15 to 35 per cent of outstanding banknotes are used to facilitate legitimate transactions within Australia;
  2. roughly half to three-quarters of outstanding banknotes are hoarded; of this, we can allocate 10–20 percentage points to domestic hoarding, and up to 15 percentage points to international hoarding;
  3. around 4 to 8 per cent of outstanding banknotes are used in the shadow economy, of which, 3–5 per cent are used to conceal legal transactions, 1–2 per cent are used to purchase illegal drugs, and up to 1 per cent are used to store profits from illegal activity; and
  4. around 5 to 10 per cent of outstanding banknotes are actually lost.

This is actually quite fascinating when you drill down into these numbers.

Take, at the first instance, the last figure – 5 to 10 per cent of notes that have been circulated (and not withdrawn) are thought to have been lost, destroyed, forgotten or in numismatic collections. That means people have lost somewhere between $3.8 and $7.6 billion. How on God’s Earth do you lose several billion dollars, dear Australian people? Is there some couch out there in the suburbs, which should be listed by “Business Review Weekly” in the annual top 10 of the richest Australians? I mean I get it that a note can sometime fall out of your pocket or somehow get inside a pile of papers you throw into your recycling bin. But $7.6 billion? Really? If, for the sake of argument, they were all $20 notes, you people have somehow managed to lose 380,000,000 – that 380 million – of them. If you stacked them all up, it would make a money tower over 50 kilometres tall. So how the flipping hell do you lose that money? And lose it irretrievably too; it’s not like a $20 note fell out of my pocket and you found it and bought a kilo and a half of chocolate. They’re lost lost. Or destroyed; presumably by the proverbial people who have money to burn.

And how about this – between $38 and $57 billion of notes don’t actually see a light of day. You – or somebody else – are hoarding them. No doubt some are kept in bank vaults and bank safety deposits, but there must be hell of a lot of suitcases full of money under people’s beds. Or in safes. But really, that’s a lot of money most likely kept in stacks of neat bundles. To the best of my knowledge none of my closer friends keep their savings in piles of cash. Granted, my closer friends are not necessarily a representative group, but at the very least they are people who would actually have some spare money, whether it’s cash or not. As none of that money is included in illicit profits, there must a lot of people out there who don’t sell drugs but behave like they do.

In case you’re wondering if it’s just some weird Australian thing – that Down Under we have weird fetishes for throwing fistful of dollars into the ocean or burying treasure troves in the Outback, where they are protected by squads of killer kangaroos and rabid dingoes – reading the full Reserve Bank report linked to above will show you that the international comparisons are quite similar. So all you Yanks and all you Euros are just as bad.

Money is inherently strange. Not only is most of money funny, created out of thin air and often existing only as blips on computer screens, but even most of the real, tangible money you can rub on your body or roll around in bed isn’t actually there by the sounds of it.

Can I have my $3000 of banknotes now, thanks?