AUSTRALIAN COIN AND BANKNOTE RISKS

Don writes:

 

Briefly, in the days after the death of the Queen, we were afforded a glimpse into the machine that makes Australia's money.

Assistant Treasury Minister Andrew Leigh turned up at the Royal Australian Mint to explain the process by which a portrait of the King Charles will replace the portrait of the queen on the heads-side of coins minted from 2023.

(And yes, he noted "for the avoidance of doubt, for any conspiracy theorists out there, all coins bearing the face of Queen Elizabeth II will remain legal tender".)

The Mint makes an extraordinary 120 million to 140 million coins per year (even more, as much as 175 million when Australians stocked up on cash during the first year of COVID), and it is a money-making operation in more ways than one.

Usually it costs the Mint far less to make each coin than each one becomes worth the moment it is sold to a bank (before metal prices climbed, it cost the mint about 20 cents to make a $2 coin, and about 15 cents to make a 50 cent coin).

The profit — the huge mark-up — goes straight to the Commonwealth budget as non-taxation revenue, tens of millions per year. It's called "seigniorage" an ancient French word that refers to the profit only a seignior (feudal lord) can make from the exclusive right to mint coins.

This financial year the government expects $59 million, next year $67 million.

In 2020-21 Note Printing Australia delivered 234 million notes to the bank for a fee of $74 million, suggesting they cost about 32 cents each to make. Most were $50 and $100 notes, sold to private banks for $50 and $100 each.

That profit is accounted for differently to the profit for coins, and is hard to find.

One estimate, in an international study of 90 countries at the end of the 1990s, found Australia's income from seigniorage of notes and coins to be low compared to other countries at 2.6 per cent of government spending.

But 2.6 per cent is an enormous amount. These days that'd be $16.3 billion, which is about what we spend on the Pharmaceutical Benefits Scheme.

In 2016 the Mint developed a proposal to cheapen the metal content of its five, ten and 20 cent coins and shrink the size of its 50 cent coins, which it says was favourably received by retailers and banks who wanted coins that weighed less. The idea was submitted to the Treasury, but "not progressed".

In the meantime it has partnered with Woolworths to produce limited edition "Olympic" and "Wiggles" coins that are delivered as change through cash registers rather than through banks, for which it charges a touch over $2.

There's a lot that can be done, and every time there's a crisis, we seem to re-discover cash. But eventually the money making machine will stop.

To read the complete article, see:
The Mint and Note Printing Australia make billions for this country – but it could be at risk (https://www.abc.net.au/news/2022-09-21/the-mint-printing-money-why-cash-won-t-last-forever/101458918)

	NBS (coinbooks.org) Web