Cash Economy in Australia Under Attack; Future of $100 AUD Banknote May Be in Jeopardy

Image Credit: By Huw from Canberra, Australian Department of Finance (Finance Uploaded by Parkes) [CC BY 2.0 (], via Wikimedia Commons

The Australian government will be launching a new financial task force that will be overseeing taxation in the cash economy. Kelly O'Dwyer, Financial Services Minister of Australia, said details regarding the new unit will be forthcoming in the mid-year budget, which is set to be released next Monday.

The measure is part of the Australian government's multi-pronged strategy of reclaiming some portion of lost tax revenue. According to some estimates, the black economy of Australia is valued at $21 billion. This figure amounts to about 1.5% of the Australian GDP, “If we can get a percentage of that, obviously that’s revenue that is owed to the Australian people,” said Ms. O'Dwyer, in an interview with ABC radio.

Michael Andrew, former chairman of KPMG, will be heading the new task force. Australian financial regulators, The Reserve Bank of Australia and The Australian Taxation Office will be collaborating with the newly formed organisation. Along with tackling illicit black market activity, the task force will also focus on a variety of financial crimes.

As part of the attack on the black market sector of the Australian economy, regulators may consider removing the $100 AUD banknote from circulation.

When asked about the future of the $100 note, Ms. O'Dwyer told ABC radio:
"I'm not going to put a limit on what the taskforce can look at."

Popularity of the $100 note has surged this year! According to the most recent report published by the Reserve Bank, the amount of $100 banknotes grew by 9% in 2015/2016. This figure is about 1.5% higher than the 10-year average, which stands at roughly 7.5 percent.

Data from the Reserve Bank of Australia from June of this year, shows that $100 banknotes number about 328 million, which represents 47% of all cash in circulation in the country.

The bank’s report explains that the rise in $100 notes can be attributed to fluctuation of exchange rates and economic uncertainty, however, the report notes that “growth in high-denomination banknotes is well above recent growth in nominal income.”

The report also states that $100 notes are hoarded in times of low interest rates and used as “store of wealth.”

When asked about cash payments during today’s interview on ABC radio, Ms. O'Dwyer said:
“There’s nothing wrong with cash, per se, the issue is when people don’t declare it. And when they don’t pay tax on it.”
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  1. There is a certain degree of sense to the reduction in high value notes in circulation. A modern economy, with a reliable debit card and banking infrastructure, can easily manage without large denomination banknotes. Provided the withdrawal is not sprung as a surprise, it will have little impact. The withdrawal of the €500 note in the EU simply by ending the printing of them, but allowing them to retain their value, is proceeding without protest or social complaint. The €500 note will disappear "organically" as they pass into the hands of banks and back to the ECB for replacement by lower denomination notes. This ECB process contrasts sharply with the recent actions of the Venezuelan and Indian governments, whose actions have left many honest citizens facing great losses as a result of simply not having enough time or even the realistic possibility of exchanging their notes.

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  2. i wonder why the authorities are resorting to remove a particular notes in order to address some financial matters, like this one that taxation is the problem, why don't just strengthen their agencies that handles this matter and impose what is written in their laws.


  3. It certainly sounds to me as if this is becoming an increasing trend across the world as governments try and come to grips with money disappearing into 'black holes'. The public are increasingly using 'the mattress bank' more and more as banks continue to keep savings interest low and bank charges high.