A BAN on cash transactions of $10,000 or more - punishable by two years in jail and/or a $25,200 fine - has been proposed by the federal government as a way of countering tax evasion and other crimes including money laundering.
First announced two budgets ago, the proposed ban has been working its way through the bureaucracy and, as the Newcastle Heraldreported on Monday, draft legislation has been prepared. But there has been very little publicity about the issue and the public were given just two weeks to comment on the proposal, with that brief window having now been closed.
Various European countries have already instituted cash transaction limits, but questions remain as to how effective these policies have been. There is no suggestion, for example, that criminal activity has been wiped out in Italy or in Greece - two of the countries with tight cash limit laws. The history of banking shows that criminals will always find a way to launder their profits.
Still, the "cashless society" has been looming for some years, and digital payment systems have eliminated the need for ready cash in many people's lives. The price of this convenience includes electronic theft and other data breaches, and the trail we leave for anyone wanting to exploit it: a data trail that does not exist with cash.
As Orwellian as these concerns might be, the parameters of the debate are well known. But there are other, less well-known aspects of the move to a cashless society. One is the safety of "cash deposits" or savings accounts in banks, under bail-in laws Australia introduced in February 2018 in readiness for a future financial crisis. The other, potentially more direct link, is cash as a barrier to interest rates falling below zero.
Recent research published by the International Monetary Fund says: "The existence of cash prevents central banks from cutting interest rates much below zero. One option to break through the zero lower bound would be to phase out cash."
This would be needed because "deeply" negative interest rates would induce people to take their money out of the banks, "which could lead to a substantial outflow of deposits from the banking sector".
As speculative as these ideas might be, the Australian public should be told if they - or anything similar - are any part of the government's proposed $10,00 cash limit.
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