The looming end of cash will fuel conspiracy theories and hoarding

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Agnetha and Frida wanted money, money, money. Mark Knopfler complained about money for nothing. The Pet Shop Boys said they wanted to make lots of money. And Cyndi Lauper noted that money changes everything. But these musicians might have to start changing their tune.

For the first time since Australians used pounds and pence, the actual amount of money circulating in the economy has dropped. In effect, $1 billion in notes has literally disappeared over the past 12 months.

ABBA sang about money, money, money. But the nature of money is changing as cash starts to disappear.Credit: AP

The resources industry talks about peak oil – that point where global oil production starts to fall.

Yet we may be at the point of Australia’s peak cash. The days of stuffing wallets and jam tins with $20 and $50 notes could soon be over.

That means some of our most vulnerable, from the busker entertaining us along the Bourke St mall to the grandmother sending a birthday card with a $5 note tucked away inside, could be left behind.

They can be protected, through direct education and the issuance of debit cards to those still holding on to their cash (with assistance from the nation’s banks).

But what should worry us all is that the switch from cold, hard cash to digital dollars will become another fault line in a democracy that is already under attack from misinformation, conspiracy and institutional failure.

The COVID pandemic was used by those prepared to blatantly lie or spread mis-truths for their own ends. The shift away from cash will put that sort of activity in the shade as opponents throw every meme, petition and online campaign against it.

We use money to buy goods and services. But it also has another important role as a store of value and a tangible measure of security.

The store of value/security role was clearly seen during the COVID shutdown in early 2020.

Between February 2020 and the end of the year, the amount of cash increased in the economy by almost 19 per cent. The number of $50 notes in circulation jumped by a quarter – even though consumers were largely buying goods online or using tap-and-go technology when they could escape to the local coffee shop.

The Reserve Bank and other analysts put this cash hoarding partly down to issues of privacy and security. (Policing authorities have their own, legitimate, concerns that high denomination notes are the payment system of choice for criminals.)

In the US, cash hoarding has also soared as the conspiratorial left and Trumpian right donned tin hats and pointed to imaginary black helicopters in the sky in a development that suggests the world’s great democracy is barely governable.

Last month, the Reserve Bank released the results of its regular consumer payments survey, which tracks changes in the way Australians use money.

It confirmed why we’ve reached peak cash. In the past three years, Australians halved the share of cash payments to just 16 per cent.

Three-quarters of us are now considered “low cash users”.

The number of high cash users – those who hand over a $10 or a $20 note for at least 80 per cent of all their purchases – halved over the same period to just 7 per cent of Australians.

Unsurprisingly, those high cash users are likely to be older and in regional areas. Yet even a small group of people can have a tremendous sway in something as important as the payments system.

Then-treasurer Josh Frydenberg had to abandon a pre-COVID plan, recommended to him by agencies trying to crack down on the black economy, to stop cash transactions worth more than $10,000.

All sorts of arguments were run by elements of the Liberal Party rank-and-file against the idea, as if Australian liberty was based on the concept of hiding $10,000 under the mattress.

There was good reason for the idea to end such large cash transactions. They are used by criminals, including those who would prefer the Tax Office or anti-terror police agencies did not know of their activities.

The same RBA survey that showed a collapse in the use of cash also confirmed that cheques are as common as good Rick Astley songs.

Treasurer Jim Chalmers last month announced plans to end the hopelessly expensive, outdated, unsafe and unloved cheque system by 2030.

The RBA and commercial banks have wanted to kill the cheque system for more than a decade. Some countries already have.

Yet Chalmers is giving the country the best part of seven years’ warning that the cheque system will be wound up.

Cheques are the past. A new form of payment – cryptocurrency – is being promoted by some as the way of the future.

A research note released this week suggested 1023 new cryptocurrencies were listed on financial markets in the past five months. There are now more than 9700 of them (of which just five account for 80 per cent of their total value). By contrast, there are 180 currencies like the Australian dollar in use.

Spruikers of cryptos continue to argue they could be the future of money. In reality, cryptos are a new way for financiers to fleece the unsuspecting and give a leg up to criminals while doing untold damage to the environment because of the energy used in their creation.

The past 15 years has been very unsteady for the domestic and global economy. That unsteadiness has been a growing source of calories for the loons on the left and right who prefer to deal in conspiracy than fact.

Economic uncertainty has long been associated with political upheaval. It is no coincidence that the Great Depression fuelled the rise of fascism and communism. The stagflation of the 1970s inflamed the social, cultural and political tensions of that decade.

Since the global financial crisis, the world has undergone 15 years of economic uncertainty. Populism in all its forms – from Brexit to Trump – is the result, aided by the loons on the left and right who prefer to deal in conspiracy than fact.

Social media has given them even more avenues to spread their thoughts.

We are now at another important juncture. The very nature of money, the driving essence of an economy, is rapidly changing.

The vulnerable will need a helping hand – from government and business – to ensure they remain part of the economy. Dealing with opponents, who will not let this opportunity slide by, will be much tougher.

Prince once said that money don’t matter 2 night. But he wasn’t facing peak cash.

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