After all, the European Central Bank announced a similar measure in May, signalling the phase out the €500 note by the end of 2018. “Authorities increasingly suspect that they (€500 notes) are being used for illegal purposes, an argument that we can no longer ignore,” the bank said.
"Any moves to modify the capacity to use cash in an undisclosed manner could provide a boost to the use of currently available alternatives."
Mike Ebstein, Director, MWE Consulting
Digital currencies such as Bitcoin may be some distance away from mainstream application but electronic-card-based options are now well-established payment choices, particularly in Australia.
Despite that, Australia has seen consistent growth in cash holdings in the form of physical currency. It’s an anomaly and the Australian Tax Office has a current research program, "Cash and the Hidden Economy", scheduled for completion in February 2017.
That research is intended "to understand, track and measure community behaviours, drivers, attitudes and perceptions of the cash and hidden economy; to seek empirical evidence to inform and drive future policy and tailored intervention strategies”.
According to media reports, the building and construction industry will be the next main target of the taxman's attempts to claw back revenue lost in an illegal cash economy.
The ATO reportedly estimates about 1.6 million businesses, mostly micro and small with an annual turnover of up to $A15 million, operating across 233 industries as possibly participating in the cash economy.
From this perspective, perhaps Australia is not that far removed from India and the moves to “demonetise” the 500 and 1,000 Mahatma Ghandi series Rupee notes.
SHOCK AND AWE
The shock-and-awe removal of 5, 10, 20, 50 and 100 Rupees was taken to curb the supply of counterfeit notes being used in the black economy and in funding terrorist activities.
The 500 and 1,000 Rupee notes accounted for 86 per cent of the value of notes in circulation. The strike has resulted in chaotic scenes as Indians have only until 30 December 2016 to deposit or exchange their large denomination notes for existing currency or the Mahatama Ghandi New Series 500 or 2,000 Rupee notes.
Meanwhile in Australia, Reserve Bank statistics show the value of notes in circulation in Australia was $A72.1 billion as at October 2016.
This level has doubled over the last 12 years with the RBA noting in its 2016 Annual Report demand in the latest year was strongest for $A50 and $A100 notes.
The RBA A6 table shows the $A50 and $100 notes now account for more than 92 per cent of the value of all notes in circulation with the expected life of these notes being very much greater than for the smaller denominations.
Given the larger value notes are not being used as frequent payment options in a similar manner to $5, $10 or $20 notes, the obvious question is whether an Indian style move could be considered as an option for the Australian market?