
The Reserve Bank (RBA) has recently called out “hoarding behaviour” by Australians who continue to panic about the pandemic. They’re not hoarding toilet paper. Or hand sanitiser. Or even pasta, rice, or lamb chops. This is about cash.
Australian banks are very, very safe. Very. Not only are they forced by law to carry lots of capital that means they won’t go broke, the deposits in them are also guaranteed by law. If they do somehow fail, depositors get their money back (up to $250,000 per account).
And yet, when difficult times strike Aussies get scared and try to take solace in cold hard cash. It happened in the dot-com bubble. It happened in the GFC. And during the pandemic it happened more than ever before.
“While strong cash demand is typical of periods of economic stress, the strength of demand during COVID-19 has been unprecedented,” the RBA notes.
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“Not only has the growth in banknotes in circulation exceeded that encountered in the past, it has been the most sustained period of strong growth.”
In 2020, Aussies loved nothing more than a “pineapple”. As the next graph shows, the RBA found itself issuing an extra net $10 billion worth of the bright-yellow $50 note as they disappeared out of circulation and into shoeboxes.

By contrast, nobody wanted the $5 and $10 notes. The green line (representing 2020) is actually lower than the orange line (representing previous years) revealing that fewer new banknotes were issued in those low denominations.
The $50 note made up 70% of all the banknotes printed by the RBA since the start of the pandemic in March 2020. Hundred-dollar notes were the second most popular category, making up 20% of all new notes printed. Scarcely any $5, $10 or $20 notes came off the presses. In fact, they shut down the $5-note and $10-note lines for six months because no new notes were needed.
Are we spending all this cash? Lol, no.
Spending cash was already becoming weird and eccentric before the pandemic. “The share of total retail payments made in cash has fallen from 69% in 2007 to 27% in 2019,” the RBA says.
That includes online payments — but even if you only count in-person transactions, cash was used just 32% of the time. During the disaster, cash use during in-person transactions has fallen to less than a quarter (just 23%).
So what’s happening to all this cash that’s getting printed? People aren’t using banknotes when their toilet paper stash runs out, are they? Those were desperate times last March/April, but hopefully not that desperate. The mind boggles.
It’s important to remember that people really were freaking out. Back in April 2020 we didn’t know much about the virus at all and how it was transmitted. People were frightened of everything. Even now, 28% of respondents to an RBA survey said they thought cash was “unhygienic”.
Businesses also turned against cash with a vengeance. As the RBA notes, “45% of respondents had encountered a business that did not accept cash in the month of September 2020, a substantial increase from 23% in 2019″.
The most likely reason for banknote demand is neither spending nor, ahem, personal hygiene. It is what the RBA calls “hoarding behaviour”. People get worried. They fill the car with petrol and their wallets with money.
That’s usually totally irrational but these days, maybe not so much. After all, the actual bank isn’t paying interest anymore. As the next graph shows, interest rates are almost zero. Even though inflation is very low, interest rates are lower than inflation.

Banks are committed to keeping your money safe. That’s not nothing. But in the good old days we could also get paid for leaving our money in the bank. Once upon a time you could actually get a rate of interest higher than inflation. Not anymore.
When you leave money in the bank it loses purchasing power. So, Australians seem to be thinking, why not keep it at home in fat stacks? Maybe pile it up like Walter White in the TV show Breaking Bad, or swim in it like Scrooge McDuck?
The slower pace of banknote use should also mean much less damage to banknotes. This means the recycling arm of the RBA has less work to do. A few years ago they were destroying $1 million worth of used cash every hour. Now it is almost certainly less. Money doesn’t get worn and torn if it is being hoarded.
So what will happen with all this cash? Is you withdrew during the pandemic, my advice is to spend it ASAP. The longer that money sits in shoeboxes, the higher the chance it gets forgotten about or lost. And then it’s gone forever.
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What is wrong about saving cash for a rainy day.
There’s nothing in the article suggests it’s wrong. It’s just strange.
It’s not really ‘saving’; people are withdrawing and hoarding cash from their bank accounts. There’s really no other way to get hold of cash unless you have a ‘paid in cash’ job or trade.
I know quite a few people who are worried about proposed legislative prohibitions on the use of cash and, bizarrely, want to have an emergency supply of “real money”. How such “real money” is going to help, in the event that cash is banned, isn’t at all clear. Weird, huh?!
And as usual, no nuance, Aussies hoarding cash! Except for the bottom 30 or so percent who are struggling to survive! But hey, if Aussies are hoarding cash, we can scrap Jobkeeper, shrink Jobseeker, and cut other benefits because Aussies are hoarding cash!!!
No thought given to the possibility of off-the-record transactions in the service economy, eg discount for cash to the gardener or cleaning lady, or for services like those purchased by Michael Johnsen, late of NSW Parliament, or those provided in the APH Prayer Room?
Am of an older generation. Have experienced difficult times and know comfort of that all important coin or note set aside to settle a debt. This very day, once again, scammed. The electronic age has allowed many advantages despite ever more sophisticated criminality. Thought of a cashless society, dread, paralyses my sense of control. Electronic crime always, seeking to outsmart even national governments, banks, everyday functionality. At times of community dysfunction, disaster, when one realizes, value of self reliance. A note or two safe in a secure shoebox spells independence, self control. An iPhone immersed in flood waters or computer frazzled by lightning in middle of once in lifetime cyclone debris . . . and power unavailable for three, four weeks? A wet note will still fuel car and place food on table. Hoard in moderation peoples and stuff those secure in glass houses.
Imagine waking one morning and the entire net has disappeared and those with no bank statements trying to prove they have accounts. Can’t possible happen could it.
That’s it TonyP! Also, keep in mind, as I was reminded this morning. A cashless society not cheap. Regular updating of computer, software, phone etc etc are all part of a ‘defence’ requirement. Overall, technological growth, expansion possibly ‘the’ most rapid change, adaption and adopt sector known to man?
One big solar flare and we will see how good your electronic society is, phoners. Not to mention EMP weapons which are overhead right now. All financial planners recommend you hold a reasonable amount of cash as a fall-back. Cash is also a good antidepressant. If they want to take away my cash, they’ll have to wrest it from my cold, dead hand. Etc.
These financial planners seldom say their advocacy of a cash reserve refers specifically and only to bundles of banknotes. They generally seem to include readily accessible cash held in current and savings accounts.
As for the more apocalyptic scenarios you envisag, it’s true that would put the banking system out of commission. But trying to exchange bank notes in such circumstances would be unlikely to bring you much joy either – after all they are bank notes – no banks (and maybe no government either) and they become just fancy sheets of plastic.
Obviously Shopkeeps could/would accept cash -IF/WHEN electronic payments system fails.
After a nuclear bomb has gone off? Did you think about the sort of circumstances ‘drastic’ was postulating? Perhaps you live among unusually tough and phlegmatic shopkeepers.
Be none left after a Nuclear incident. Try again – you must have more outlandish examples?