2 days Ago By Millie Muroi
Save Log in , register or subscribe to save articles for later. Save articles for later Add articles to your saved list and come back to them any time. Got it Normal text size Larger text size Very large text size Armaguard chief executive Matt Caulfield, whose company is responsible for the safe storage and transport of about 90 per cent of the country’s cash, wouldn’t mind if he never saw a coin again.
“Coins are very heavy relative to their value,” he says. “Our operations, including storing and processing coins, are complex, cumbersome and expensive to operate.” It’s the 5¢ piece that costs the country the most.
In September 2022, Royal Australian Mint chief executive Leigh Gordon revealed it cost more than 12¢ to make each 5¢ coin. In 2022-23, the Mint made more than 110 million Australian coins. In 2023-24, it made about 47 million.
Credit: Matt Davidson And despite only 18,700 5¢ pieces being purchased from the Mint in 2023-24, it made 10 million more 5¢ coins this year – with the image of King Charles III. Except for coins locked up in shops and ATMs, or those down the sides of couches and underneath beds, Australia’s cash sits mostly in Armaguard’s secure facilities and armoured vehicles. “We’re like Uber for cash,” Caulfield says.
But he would much rather have banknotes for passengers than coins. Advertisement While $1 million in banknotes could fit snugly in a briefcase, the same amount in $2 coins would require the space of several bathtubs. If it were up to him, the 50¢ piece would be first on the chopping block.
“50¢ pieces are the heaviest and most cumbersome, and their shape is unique,” he says, which makes carting them around the nation an expensive and heavy task. Then there’s the cost of producing coins. While the Mint declined to reveal more recent cost-of-production data, chief financial officer Amanda Benn says it is largely based on metal prices.
“The majority of the cost fits within the metal component,” she says, with some additional costs for workers and overheads, including machine maintenance. Advertisement The $1 and $2 coins, made up of 92 per cent copper, generally cost less to produce than 5¢, 10¢ and 20¢ coins, which are 75 per cent copper and 25 per cent nickel. Although the Mint was making a loss on producing 5¢ coins two years ago, Benn says it has consistently made a profit from its overall coin production.
Or to use the parlance of the currency world, it had positive seigniorage (the difference between the cost of making a coin and selling it). But the use of cash is declining, and Caulfield can see that first-hand through Armaguard’s business. In 2022, cash payments accounted for just 13 per cent of all consumer payments – down from 70 per cent in 2007.
Caulfield says businesses are sending coins back to Armaguard by the truckload, with millions – including the surplus stock stored on behalf of the Mint – piled up in its vaults. “These coins may not be used again,” he says. The fate of these coins will depend on the Mint’s guidance.
Demand for cash has fallen through the floor since COVID-19, Caulfield says, with the sharpest drop in 5¢ and 10¢ pieces. Advertisement And while Caulfield might like to see the end of the 50¢ piece, an ANZ spokesperson says the bank’s data shows consistent demand for $1 and 50¢ coins. The bank dishes out more of these than it receives from customers, but has a surplus of 5¢ and 20¢ coins.
“How our customers bank has changed in recent years, particularly since COVID, with more customers using digital banking than ever before,” the spokesperson says. Just 1 per cent of the bank’s transactions are conducted over the counter. Royal rise Since King Charles III became monarch, the Mint has made more than 45 million coins with his visage, including 5 million 50¢ pieces and 10 million 5¢ pieces.
“When we do release new effigy coins, we tend to see a little spike in demand for them ...
then [people] hoard them.” Royal Australian Mint CFO Amanda Benn But even with a new head of state, why is the Mint making so many coins? “Production of coins will continue as long as there is some demand out there for them,” Benn says, noting some people in the community require coins or prefer to use cash. Advertisement And when there’s a new effigy, there tends to be a bit of hoarding.
“When we do release new effigy coins, we tend to see a little spike in demand for them,” she says. “People want to get their hands on them and they like to get them fairly new. Then they hoard them and they don’t put them back into circulation.
” Benn says coins also get lost or end up collecting dust. “There has been a drop-off in demand, but we tend to find, anecdotally, that those smaller denomination coins don’t necessarily get returned into the pool,” she says. “Kids pop them into their money boxes, they fall down into couches, and people just forget about them and don’t use them.
” As demand for coins has declined, so has production, Benn says, with the Mint’s forecasts, based on historical demand, suggesting it will probably shrink further. In 2022-23, the Mint made more than 110 million Australian coins. The year before that, it made more than 134 million.
In 2023-24, it made about 47 million. Advertisement Economics of cash The economics of cash has been under scrutiny for some time. Australian Banking Association chief executive Anna Bligh says rising costs and shrinking demand for cash are rapidly making the current model of moving notes and coins unsustainable.
“Australia isn’t going cashless, but we do need to prepare for a future with less notes and coins,” she says. Treasurer Jim Chalmers speaking with ABA chief Anna Bligh. Credit: Peter Rae Banks, retailers and government are working towards a more efficient and sustainable long-term solution, Bligh says.
But Armaguard, which faced the brunt of the cash decline, is under no illusion that its business will have to change. In June, Armaguard received $50 million of funding from the big banks, retail giants and Australia Post to shore up the distribution of banknotes and coins. And although the government in November pledged to ensure people can continue to pay with cash for essential items, Caulfield says the decline in cash will transform his business.
“If [the] government has mandated cash has to stay, there will be cash forever,” he says. “But it could become more self-service based, and as a cash provider, Armaguard could become smaller.” The banks have agreed to a short-term funding deal to ensure Armaguard keeps delivering cash.
That could mean fewer trucks and staff, more smart safes and less frequent deliveries. Treasurer Jim Chalmers says there are constant discussions about the coins that are made and the currency that should remain in circulation. However, Assistant Treasury Minister Andrew Leigh, who is responsible for the Mint, says the scrapping of coins has not been an active discussion.
“There’s a range of priorities for the government and this isn’t even on the list,” he says. While the 5¢ piece would be the first to come under scrutiny, Leigh says it would need to go through parliament and would come with a rounding issue. “Australia isn’t going cashless, but we do need to prepare for a future with less notes and coins.
” Australian Banking Association CEO Anna Bligh “If you phase out a 5¢ coin, it’s not obvious whether 95¢ rounds down to 90¢ or rounds up to $1, so that’s one of the issues that we would have to confront if we looked at it,” he says. While cash may not disappear completely for some time, commercial banks, which are among the Mint’s biggest customers, have been drawing on their own reserves instead of ordering new coins. Banks demanded about 47 million Australian circulating coin pieces in 2023-24, the Mint said in its annual report – down from 110 million the year before.
As a result, there was a significant reduction in revenue, the Mint said, with its seigniorage – or profit – coming in at just $400,000, down from $26.8 million the year before. Loading But Benn says the Mint has to hold stock for times when demand, which can be unpredictable, spikes.
“Coming into Christmas, we do see a pick-up in the demand for coins from the banks,” she says, noting banks had been ordering more coins in the past few months. “The amount of that demand has been less predictable, so we tend to try and level our production to make sure that we have enough stock on hand to meet that demand as it comes through.” As for the fate of millions of coins stored by Armaguard, Caulfield says it depends largely on what the Mint decides to do with them.
If there is no demand to send them back into the economy, the coins will probably be recycled for their metal components, he says. Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter .
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