- Cashless future will save billions and requires red tape abolition: Alex Hawke
- Hello dollar bill: 50 years ago today, Australia went decimal
We all think about money every day, from paying our mortgages to scouring for change that will buy a coffee or paper. How many of us really think about the currency we use to make these payments? How did we end up with a decimal dollar divided into 100 cents?
Sunday marked the 50th anniversary of the introduction of decimal currency. For those of us too young to remember, before 14 February, 1966, Australians used pounds, shillings and pennies. A shilling was worth 12 pence and a pound was worth 20 shillings. Having a non-decimal currency wasn't always easy, but the pound served well as our currency for more than 150 years. Changing the currency would be a long, difficult and expensive process.
In the 19th and early 20th centuries, Australia flirted with changing the currency to a decimal system, but nothing ever came of the plans. However, in the early 1950s the Treasury sent a young economist by the name of Neil Davey to the University of London to study for his PhD. Davey eventually settled on studying the history of decimal currency, finalising his thesis in 1957.
Davey's work served to bring decimal currency back to the forefront of attention across the Commonwealth. Officials in South Africa, one of the first Commonwealth countries to adopt decimal currency, directly attributed their awareness of the benefits of decimalisation to Davey's work.
In 1959, the Menzies government commissioned a detailed study into decimal currency. Led by Davey, the work clearly showed the benefits of the shift, and by June 1963 the government announced Australia would shift to decimal currency in 1966. The announcement began a huge, two-and-a-half year campaign to prepare Australia for the change from the pound to the dollar.
Robert Menzies and his Treasurer, Harold Holt, understood the inconsistent units in the pound were a drag on productivity, and despite the high up-front cost of changing coins, notes, price tags and cash registers to the decimal system, the move would have long-term benefits for Australia.
In our current age of calculators and computers, it's easy to underestimate how much time workers used to spend on basic arithmetic tasks. Company accounts were painstakingly completed by hand and shopkeepers manually entered all prices into a register. Making these tasks simpler would save a huge amount of labour for businesses. Documented by Peter Rees in his new book Inside the Vault, Ian Sykes, a research analyst at the time, estimated that the switch to decimal would produce roughly a 5 per cent productivity gain for workers with roles that included arithmetic. This productivity benefit was estimated to save the economy about £11 million a year, which was a huge sum in 1966.
On the 50th anniversary of decimal currency it's only natural to consider what the next 50 years will bring for the Australian dollar, especially as new payment technologies become ever more common.
Since 1966 Australians have moved from having only two ways of paying for goods - cash and cheques - to a whole suite of electronic payment options. We've seen the emergence of the credit card and debit card, the rise of eftpos, the introduction of contactless technologies and instantaneous transfers. The days of receiving a weekly pay cheque or a pay packet filled with cash are long gone. These days we are accustomed to using internet banking with salary payments appearing in our bank accounts, then just as quickly disappearing as we use Bpay or online transfers to pay our bills.
The new technologies have come with challenges, most notably security concerns. However, technology has also ensured improvements in security. Signatures are gone and PINs are on the way out. Already new, better security technologies are becoming common. Fingerprint scanning and voice recognition provide a level of security far beyond anything previously available, while advanced monitoring software allows financial institutions to know instantly if our details are being stolen.
Cheques are almost obsolete and even cash is declining in popularity. According to the RBA, in 2013 cash represented only 47 per cent of transactions, down from nearly 70 per cent in 2007.
It's easy to underestimate how much time workers used to spend on basic arithmetic tasks.
In fact, Australia is well on the way to becoming a cashless society.
Like the change to decimal currency 50 years ago, the move to a cashless society will be a fundamental shift in the way Australia's payment system operates. The change will lead to countless benefits for all Australians in convenience and security, and will save billions in transaction costs every year.
However, unlike the government-led change in 1966, the move to a cashless society will be driven by consumers and businesses choosing the payment methods that are best for them.
In the face of this change, the government will need to be nimble, removing obsolete regulations and ensuring that innovation isn't stifled by ill-considered interventions.
Alex Hawke is the Assistant Minister to the Treasurer.