$2,200 million, the 15th largest single monthly rise on record and the highest (by value) March increase ever. Growth in April was also strong, with a further net increase in notes on issue of $372 million, but news just out shows that, despite a widespread shut down of the Australian economy, banknotes continue to flood out of the Central Bank’s doors with total currency on issue growing by a further $2,383 million in May to a new record high of just over $88 billion. That’s a 10.6% increase (up $8.5 billion) in the past year.
Landmarks in an Australian Journey Australia is ahead of most of the world in its journey back to more normal times, albeit with a long way to go (for example Melbourne, a city of some 5 million people, has recently had to lock down again, and so it is interesting to note the landmarks and character of the recovery). The headlines are that in Australia April saw a major drop in economic activity with steady recovery in May and June. There was a major switch to online shopping using debit cards rather than credit cards and the public has been paying off their credit card balances. Cash usage has increased, with the $50 in most demand. The $100 saw an initial surge but demand has fallen back. There are signs of cash usage returning. Economic activity remains significantly reduced. Paul Blond, Managing Partner of The Blond Group, is writing a series of posts about the changes in cash during the pandemic based on data from the Reserve Bank of Australia and his own analysis. This article is a digest of two of those posts. Australia’s cash in circulation data between 31 December 2019 and the end of June 2020 increased by $6.1 billion, or 7%. In January and February, it fell but thereafter, with one exception, it increased by over $2 billion each month. In April, the increase was only $372 million. As the data below shows, April was the month where the economic impact of the pandemic has been most evident, with payment activity severely affected.
Cash in circulation
A look at the number of banknotes in circulation by denomination reflects what was probably an increase in notes withdrawn as a precaution against the unknown. For banknote volumes, the annual CAGR between 2012 and 2019 was 4% and yet the increase of $6.1 billion only increased the CAGR to 5%. The three lowest denominations went down 3-4% each, presumably reflecting the lack of day to day expenditure using cash, while the $50 and $100 increased by 11% and 6% respectively. The $100 can be assumed to be largely a store value note. The $50’s increase may be both for transactions and to store value given that the increase in May nearly doubled compared with its March increase (2.3% compared with 4.3%), while the $100’s May increase was only slightly half its March increase (3.4% compared with 1.8%). The $20, a transaction note, also increased in volume in June, perhaps reflecting the start of a journey back to cash usage for payments for both the $20 and $50.
Growth of Australian Dollars in Circulation
The wider payment landscape
If cash has had a difficult time, albeit with signs of recovery, the payments picture is more complicated across the different alternatives. Value of Australian Dollar @ Point of Sale (POS) Transactions
(Source: Reserve Bank of Australia/ Blond Group analysis)
Growth of Australian dollars in circulation. (© Reserve Bank of Australia)
In an article I previously wrote Cash is not just a dirty word!, I reported that the Reserve Bank not only publishes detailed banknote by denomination data, but also a comprehensive range of payments use statistics, although given it is gathered from a number of reporting institutions, this information takes a little longer to appear. Data for the month of April 2020 (the first full month of economic and social lockdown) has just been published and provides some fascinating insights into how Australian’s (and in normal times, visitors to Australia) pay for their goods and services.
Cash withdrawals
The GDP data for the first quarter shows a slight reduction of 0.31%, but the payment data tells a starkly different tale.
The value of ATM withdrawals dropped 30% in April compared with the previous month before recovering by 17.1% in May. The $7.5 billion withdrawn in May was still a third lower than compared with the same period in 2019. Volumes were down even more which was reflected in the average withdrawal value increasing from $230 to $294. In May that figure hardly moved, remaining just under $295. The figures for cashback received at the till in retailers remained steady at $77 and credit card advances similarly remained unchanged at $380.
(Source: Reserve Bank of Australia/ Blond Group analysis)
Value of Australian dollar POS transactions. (© Reserve Bank of Australia)
A move online or ‘in app’
As with cash, April saw a major fall in the
While physical point of sale transactions are substantially down, device not present – onl value and the number of point of sale app purchases – have been much less impacted. Australian domestic (Australian acquire purchases down 27%billion andin 25% purchases have fallen(POS), just 8 percent (from $14.87 April 2019 to $13.63 billion t while the number of transactions hasaverage actually increased 4 percent year on year. The con respectively with the purchase a fall in average transaction values from around $130 a year ago, to $114 now.
value $51. In contrast, the number of online/in app purchases rose 4%. The fall Value of Australian Dollar Device not Present Transactions in average value from $130 to $114 meant that the value fell 8%. One assumes this reflects more day to day items being bought with cards rather than with cash.
In May the recovery gathered pace, rising $6 billion on April. Interestingly, debit card expenditure rose 24% to reach 99.85% The total withdrawal of cash from all of its May 2019 figure but credit cards, sources fell headline between March by the dramaticalthough While an immediate grabbing statistic and would April be to report fall in ATM cash they increased by 22%, only withdrawals (total demands with in Aprilthe was $6.4 billion, down 30from percent on the March figure and 43% compared year before, reached 72% of the 2019 figure. Since nearly 40 percent less than a year earlier), the breadth of data provided deserves more detailed $13.9 to $7.9 billion. (Source: Reserve Bank of Australia/ Blond Group December 2019, theanalysis) total outstanding analysis. Independent ATM Deployer (IAD) figures for credit card balances have fallen by nearly The value of ATM withdrawals is down, the number of ATM withdrawals have dropped even more March and April were down much more, 20% to $40.3 billion. At this time of The chart below illustrates the dramatic drop in ATM withdrawals across the board. Total ATM 57% by value and 64% by number of uncertainty, it appears the public are being withdrawals in Australia, both from bank and reporting Independent ATM Deployers (IADs), was transactions, their machines down from $10.57 billionreflecting in April 2019 tothat just $6.41 billion in April 2020, numberscautious not seen sinceabout the their financial positions. start of theto newbe millennium. The number fell even more sharply from 46.1 million to tend in pubs, clubsof withdrawals and small stores. Overall POS expenditure by the end of May
21.8 million (down nearly 53%) with a consequent significant increase in the average withdrawal value $230withdrawals to $294 (USD 204 / started EUR 181). to recover. In from Mayaround cash 2020 was
still only 88% of 2019.
addition toDeployers, the ATM rise, IADofwithdrawals ForIn Independent ATM typically with many their ATMs located in pubs and clubs,debit the Online and credit card transactions nationwide blanketby closure of these venues in late March hadwent a profound effect. The fall in increased 17.9% and cashback saw a shift from credit to debit cards as transaction numbers and, as a consequence transaction revenue, which are usually fixed per up 27.5% (both were still under half of the well, with transaction regardless of withdrawal value, were even more severe. IAD ATM withdrawals in Aprildebit cards achieving a record 2019 the figures) anda near advances fellequivalent to $688M from $1,498M previous year, 57% drop andon the number of withdrawals fell 40% of all online transactions. While credit 64% to just under 3.3 million credit cards rosetransactions. 5.3%. Australian Dollar Value of ATM Cash Withdrawals
card usage in May increased to 75% of their 2019 figure, debit cards increased by 115%. Debit cards had increased by 88% and credit cards by 67%. The decline in tourists visiting Australia and of Australians travelling overseas is also visible in the figures. The use of overseas cards in Australia at ATMs fell 54% and at POS 89% in April and Australian cards used overseas fell 83%. May’s figures were similar.
Cheque usage dropped 42% by value and a third by volume year on year in April 2020. While ATMs are a main source of physical cash, point of sale cash out (or cash back) and credit card This continued in May with a further drop to cash advances, as well as over branch counter withdrawals, are also other important sources. 47% by value, less than a million cheques Debit card cash out and credit card advances were also significantly lower. When combined with ATM data, total cash out is down from $13.9 billion in April 2019 to $7.9 billion inper April 2020, a 43% month. (Source: Reserve Bank of Australia/ Blond Group analysis)
Australian dollar cash withdrawn at ATM and POS. (© Reserve Bank of Australia)
fall.
COUNTRY NEWS | VOLUME 3 – NO 7 | JULY 2020
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