It really is the silly season. The government is thinking that it might be able to fix the budget deficit problem by abolishing $100 notes. Sure, this is an exaggeration, but it is at least looking into the issues of cracking down of the cash economy and crime with the humble $100 note in its sites. The inference is that the $100 notes facilitates crime and boosts the cash economy. There are a couple of points to note. The $100 note was introduced in 1984 and since then, the consumer price index has risen by 200.5 per cent. The purchasing power of the first $100 note has dropped to around $33.30 in today's dollar terms. $100 just doesn’t buy as much as it did 1984. If bank note issuance was to broadly track inflation, the government is behind the curve in issuing a $200 note. Even a $300 note.
And think about the issue of the $100 note. Has crime increased since the $100 note was introduced? No. Should cars be banned so criminals can’t deliver drugs and speed away from the crime scene? No. Should phones be banned so crims cannot communicate with each other? No.
The issue of the cash economy and crime have little to do with the denominations of bank notes, access to cars or phones.
It would be interesting to see if Treasury has done any work about how much crime rates would fall and how much revenue would be revenue raised if the $100 note was banned. I’ve got a suspicion there is no work because it is such an absurd idea.
Contributed by Stephen Koukoulas: (VIEW LINK)
Stephen Koukoulas has a rare and specialised professional experience over more than 25 years as an economist in government, as Global Head of economic and market research, a Chief Economist for two major banks and as economic advisor to the Prime...
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You could be spot on re the "silly season" Kouk. Without the "grey nurse" all the villains will do is make it up with a "bullseye". It does sound like someone in Canberra needs to justify their "existence". That said, here's one for you...a guy from Magellan gave a presentation at an Aust. Shareholders Association day a few months ago. He claimed to go 12 months without using the folding stuff paying for every expense he incurred via electronic means. With the advances in technology, do we really need notes and coins?
This misses a major point.Coupled with the removal of the $100 note [and the $50 note] is the proposal to ban cash transactions above a certain level. Lets say that level is $100.Above that requires a debit card [we all use a debit card - its called an OPAL card].Large amounts of cash then become useless as no one will take them as they cannot spend large amounts - a tragedy for tax cheats - a disaster for criminals. Put yourself in the place of a drug dealer.Who will take your money? Every tax dollar someone saves themselves by using cash means you and I pay more.Maybe you are happy paying others tax. I am not.