Review of Banknote Distribution Arrangements

November 2021

Cash use in Australia is changing. Despite the value of currency in circulation continuing to increase, physical cash is being used less as a means of payment. This trend has accelerated with the COVID-19 pandemic as consumers have turned further to electronic and online payment methods.

However, cash is expected to remain an important means of payment into the future, particularly as some parts of the community rely heavily on cash in their daily lives. Cash is also important as a back-up for electronic payment methods and as a store of wealth; this applies on a day-to-day basis but becomes particularly important in times of economic or financial uncertainty. For now, the Australian public has good access to cash.

The banknote distribution system is the means by which banknotes move between the Reserve Bank and the businesses and consumers that use them; it also includes mechanisms to maintain the quality of banknotes in circulation. The key elements of Australia's banknote distribution system have been in place since 2001. They were established at a time when cash was the most commonly used retail payment method and have worked well to ensure access to cash for both businesses and consumers.

The declining use of cash for retail payments has placed pressure on the current cash distribution system. Specifically, lower processing volumes have led to underutilisation of cash distribution infrastructure and increased the average cost of transporting and processing banknotes.

The Reserve Bank is committed to meeting public demand for banknotes so that cash continues to be available for those who want or need to use it. It places a high priority on the community having good access to cash withdrawal and deposit services. Having a banknote distribution system that is sustainable in an environment of declining transactional cash use is critical to this goal. As such, the Reserve Bank conducted a public consultation to determine what changes to Australia's banknote distribution system might be required so that banknote distribution is effective, efficient, sustainable and resilient.

The consultation reviewed:

  1. the structure of the banknote distribution system and the roles of existing participants including the Reserve Bank, commercial banks and the cash-in-transit industry
  2. issues faced by industry participants in carrying out banknote distribution
  3. how the current banknote distribution arrangements with the Reserve Bank impact the ability of industry participants to meet banknote demand and adapt or innovate to the changing economic environment, including the ability of new participants to be involved in banknote distribution or for new business models to emerge.

The Issues Paper sought to identify the key strategic issues and potential options for changes to banknote distribution arrangements in an environment of declining transactional cash use. Submissions closed on Friday 21 January 2022.

The Conclusions Paper summarises the submissions provided by respondents and presents the conclusions of the Review of Banknote Distribution Arrangements. The Reserve Bank will implement a package of changes that are largely focussed on areas where it has a direct relationship with the industry – in particular, the changes relate to the Reserve Bank’s arrangements with the industry for the purchase and return of banknotes and for managing the quality of banknotes in circulation. These changes are designed to support the industry to adapt as cash use by the public evolves.

Media release Review of the Banknote Distribution Arrangements – Issues Paper
Issues paper Review of the Banknote Distribution Arrangements: Issues Paper
Closing date for submissions 21 January 2022
Submissions Submissions Received
Conclusions paper Review of the Banknote Distribution Arrangements: Conclusions Paper