The case of the missing $9 billion in banknotes

Man sleeping with piles of cash. | Newsreel
Australians are hoarding banknotes and apparently losing a lot of them. | Photo: Tiero (iStock)

Australians appear to have been a little careless with their cash. Up to $9 billion in banknotes have disappeared.

And plenty more are sitting under the mattress, buried in the backyard or otherwise hoarded.

An analysis by the Reserve Bank, released earlier this year, paints a somewhat bizarre picture of the fate of our ‘paper’ money.

The research suggests between $5 billion and $9 billion of banknotes in circulation have been “lost, destroyed, forgotten or sitting in numismatic currency collections” as of June 2023.

This is more than just a few notes left in old wallets or dropped in the park.

The Endowment for Human Development in the United States released an analysis some time ago that said $1 billion in stacked one-dollar bills would reach a height of more than 100km.

In another bizarre twist, the $20 note was the least likely to disappear in the cash Bermuda Triangle.

The RBA found people were most likely to lose $5 and $10 notes, followed by $50 and $100 notes.

“This may be due to people showing less care towards banknotes of lower value, while high-denomination banknotes may be hoarded and eventually forgotten about or misplaced,” the report speculated.

“The share of banknotes used for transactional purposes is estimated to have fallen by 5 percentage points since early 2020, while cash use in the ‘shadow’ economy has increased slightly and the proportion of banknotes that are lost has remained unchanged.

“Overall, the majority of banknotes on issue are currently used for non-transactional purposes, consistent with pre-pandemic trends.”

Demand for banknotes increased by 22 percent (in value terms) between March 2020 and December 2002 during the pandemic.

“Banknote demand has since declined but remains close to its historical high,” the RBA said.

“The dichotomy of strong banknote demand alongside falling transactional use suggests banknotes are being hoarded, likely for store-of wealth or precautionary savings purposes.”

Maybe we need to check all the old coffee jars and dig up the yard!

The full report is in the Reserve Bank January Bulletin.