It’s become accepted as gospel that we are moving into a cashless society. Australians, and in particular those pesky millennials, increasingly forego carrying cash, turning to plastic to fund their indulgent spending habits. We’ve moved so far towards card-based and electronic transactions, that old-fashioned cash is almost viewed with a degree of suspicion.

Recently, the Morrison government tabled laws to restrict the use of cash in an attempt to crackdown on the black economy, with businesses that accept cash payments of over $10,000 facing prospective civil or criminal penalties. But is this such a big problem? And just how much money is buried under the mattresses of Australia?

Why is this such a big issue in Australia?

The Reserve Bank of Australia’s data suggests the move away from cash has been underway for some years now. In 2007, about 70% of all consumer payments were made using cash, but by 2016, that number had fallen to 37%. Meanwhile, the number of ATM withdrawals declined 4% in 2017-18, while the value of those withdrawals fell 0.3%. Meanwhile, payment by card has increased 12% in the last five years, and 7.1% in value.

 Australia isn’t alone in embracing cashlessness. Thirty percent of Americans don’t use any cash on a weekly basis, while one in six British adults are effectively cashless. But Australia is something of a world leader — we’ve embraced a variety of cashless payments with greater zeal than many comparable nations. Tap and pay options, for example, are ubiquitous across the country but remain a rarity in the US. 

But elsewhere, there remains a deep cultural attachment to cash. In Japan, for example, paying by credit card is considered a sign that a person is in debt and therefore dishonorable. Germany, another high-tech advanced economy, uses more cash than pretty much anywhere in Europe.

Who is using cash?

While consumers might be using it less to fund regular purchases, there’s still a whole lot of cash floating around in the economy, says Steve Worthington, a professor at Swinburne University of Technology’s faculty of business and law.

“If you’re talking about consumers, we’re using and withdrawing less and less cash. But if you include governments and central banks, the reverse is the case; the banks are still printing notes,” Worthington says.

The government’s black economy taskforce estimates the cash economy’s value at around 3% of GDP, although the International Monetary Fund suggests that figure could be as high as 13%. 

In both Australia and the US, the most common denominations being printed and circulated aren’t necessarily those used for everyday transactions. Recently, the US$100 bill overtook the $1 bill as the most widely circulated. Over 80% of that cash isn’t even used by American consumers, and is instead held outside the US — likely in countries where the Greenback has supplanted unstable local currencies. Here in Australia, 93% of banknotes used are the $50 or $100 note, hardly the most useful in an everyday setting. 

A lot of this cash could be in the kind of black market the Morrison government is hoping to break down, or in the “grey economy” — where people might pay, say, a tradie in cash to avoid GST.

Worthington also suggests that, with low interest rates, a lot of people could be stockpiling cash at home as a “store of value”. Every year, the RBA gets numerous complaints from people claiming to have lost large amounts of cash — sometimes over $20,000 — in house fires and the like, indicating a lot of people still keep plenty of the stuff at home.

Pauline Hanson’s One Nation has argued that the government’s proposed laws are part of a conspiracy to take people’s mattress money in order to stimulate a stagnating economy. This remains unverified. 

Who loses in a cashless world?

A 2015 survey found that, while Australians are abandoning cash, a majority still believed it would always be necessary for some types of transactions. For some vulnerable groups, cash is still very much king. Steve Worthington says an increasingly electronic economy could have worrying implications for financial inclusion.

“The elderly, the disabled, communities of colour and newly arrived migrants tend to have less access to electronic payments, and by making society more cashless, you’re demonising them,” he says.

Sweden, where cash is dying out quicker than nearly anywhere else, now has to grapple with how to keep some of these marginalised groups involved in the economy. 

For others, cash provides a degree of old-fashioned anonymity in a world of surveillance capitalism. During the ongoing protests in Hong Kong, people queued up to buy metro cards with cash to avoid their movements being detected by authorities. 

The occasional fallibility of tech also gives good reason for the endurance of cash. Last year, a Telstra outage left people unable to use EFTPOS services and ATMs. Worthington says all this means we shouldn’t write off cash just yet.

“We’ll continue down the path of using less and less cash, but I can’t see us being cashless in the next decade or two.”

Do you think the cash economy should be locked down? Do you rely on cash? Write to [email protected] and let us know.