Cash is losing its dominance, but here's why it's likely to stick around

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A lot has happened in the past year when it comes to cash and its future in Australia, as well as all the other ways we pay for things.

In May, Macquarie Bank became the first major Australian bank to transition to cashless, digital-only payments, phasing out cash deposits at branches but still allowing customers to withdraw cash from ATMs without fees.

The federal government will introduce legislation to protect the use of cash. (iStock)

The move left many people wondering how much longer they will be able to deal in cold, hard cash with their own bank.

Businesses too have continued to go cashless in increasing numbers, with cafe chain Gloria Jeans announcing it was joining the likes of McDonald’s and KFC in making some of its stores cash-free.

Then, just when it was starting to appear inevitable that physical money would disappear for good, the Albanese government stepped in with a big announcement about a cash mandate.

Here’s everything you need to know about the state of play with cash, digital payment surcharges, and those old-fashioned paper things, cheques.

What will the cash mandate look like?

The federal government announced its plans for a cash mandate in November, which will essentially require businesses to accept cash as payment for groceries, fuel and other essentials.

However, some smaller businesses are likely to be exempt from the legislation, depending on their size, proximity to population centres and capacity to handle cash.

Treasurer Jim Chalmers said the government would begin consultation on a cash mandate before the end of the year, but it won’t be implemented until 2026, well after next year’s election.

“People are increasingly using digital payment methods, but there is an ongoing place for cash in our society,” Chalmers said in a joint statement with Financial Services Minister Stephen Jones.

Are we actually using a lot less cash?

The short answer is most definitely yes. But that’s not the complete picture.

Figures from the Reserve Bank of Australia’s 2023/2024 annual report show that, in the last financial year, it issued $3.6 billion in banknotes.

While that might sound like a lot, it is only 40 per cent of the typical amount it issues.

Here’s the surprise though – the value of banknotes in circulation remains historically high at $100.8 billion, as of June 2024. This is the equivalent of around 4 per cent of GDP.

The total decline in banknotes in circulation for the last financial year was just 0.5 per cent, while the number of $100 bills in circulation actually went up by 1 per cent.

So, while they might not be spending it, people are holding onto their cash.

The amount of cash in circulation remains high, the Reserve Bank of Australia says. (iStock)

The Royal Australian Mint’s latest annual report also shows a similarly stark decline in the number of coins it produced in the last financial year.

While the Mint’s target was to make 128 million coins for the year to the end of June 2024, it only produced around 40 per cent of that – 47 million, a sharp drop fuelled by the banks drastically reducing the number of coins they ordered.

On the flip side, ATMs are still getting a healthy workout, despite there being 926 fewer of them compared to seven years ago, according to figures from the Australian Prudential Regulatory Authority.

Australians withdrew $106.85 billion from ATMs between October 23, 2023 and September 24, 2024, up from $104.5 billion a year earlier, RBA data shows.

Australian cash advocate Jason Bryce, who runs the group Cash Welcome, maintains this figure itself shows cash is far from dead.

“Australians want cash and are voting for cash with their wallets and withdrawing more of their money from their accounts and walking around with it in their pockets,” he said.

What is happening with cheques?

At the same time as announcing its cash mandate, the government gave an update on its plans for phasing out cheques.

The Albanese government now aims to stop cheques being issued by mid-2028, and stop them being accepted by September 30, 2029.

Initially, it had planned to phase out cheques in June 2023.

In the last decade, cheque usage in Australia has plunged by 90 per cent, with cheques now making up just 0.2 per cent of non-cash retail payments.

Banks have started taking matters into their own hands.

ANZ has already stopped issuing chequebooks to customers. Other banks, including CBA, NAB, Macquarie and Bendigo, have already begun to phase out cheques.

A crackdown on card surcharges

The surcharges applied by businesses to card payments have long been a source of frustration for customers.

The hidden fees are one of the many reasons pro-cash advocates cite for preferring to use physical money over digital payments.

An ABC analysis of RBA figures earlier this year found Australians pay about $960 million a year in card surcharges – no small figure in a cost-of-living crisis.

In October, Prime Minister Anthony Albanese announced it was cracking down on the fees, with surcharges on debit card payments looking set to be scrapped.

Credit card surcharges will not be included in the move.

The ban could be introduced from the start of January 2026, subject to consultation with the RBA.

In order to make this happen, the government will give the Australian Competition and Consumer Commission (ACCC) $2.1 million in funding to “tackle excessive surcharges” and reduce payment fees.