Monday 9th July 2018
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New Zealand's newest banknotes, known as the Series 7, are taking longer to fully replace the earlier Series 6 notes as the national currency is staying in circulation for more time than anticipated.
The Series 7 $5 and $10 notes started circulating in October 2015, with the $20, $50 and $100 notes released the following year in May 2016. They were designed to replace the sixth series of banknotes, issued in 1999, and both remain legal tender.
Like other countries, New Zealand regularly replaces banknotes with new designs to hinder counterfeiting, adding more complex security features such as a colour hologram, raised ink, and other innovations which are difficult to replicate. When the older notes are returned to the Reserve Bank, they are taken out of circulation, and the new notes are distributed instead.
Reserve Bank governor Adrian Orr said the changeover to the new notes is progressing slower than expected.
"Six is being destroyed at a slower rate than perhaps what we thought so seven is being circulated at a slower rate," he said. "I think a lot of currency goes out and stays out."
The central bank has just completed a research programme looking at the wider currency cycle and has found that while the majority of New Zealand's cash stays in the country, about a third is held outside of the country.
"A lot of the cash that exists doesn't necessarily come back so it's being used as a store of wealth and a means of exchange in other countries," he said. While this was a sign of confidence in our currency, it left open the question of what it was being used for, he said.
While the Series 6 is easier to counterfeit than Series 7, that doesn't mean it is actually easy, Orr said. Series 6 was state-of-the-art, the first of New Zealand's notes to be printed on polymer, improving durability and enabling windows to be included as an enhanced security feature.
Counterfeit attempts "pop up quite regularly" but some looked like a person had got themselves a glad wrap roll and some colouring pens after having a beer in a nightclub in the early hours, he said.
"You think: would someone really accept that as a note? I lose no sleep on that," he said, adding that New Zealand has a very low counterfeit rate by global standards.
Still, note upgrades may need to occur more frequently in the future to keep pace with advances in technology.
"While the notes are more durable, technology can keep catching up so it's a real challenge for us," he said.
Part of the Reserve Bank's research was looking at how to forecast future demand for cash. Despite the increased use of electronic payments, the amount of physical currency in circulation continues to grow every year as the economy expands and people still like to hold something tactile, particularly following events like earthquakes.
"The death of the currency is much exaggerated at the moment, and likewise the life of a lot of these cryptocurrencies," Orr said.
Cryptocurrency doesn't tick the boxes requiring it to be a means of exchange, a store of value, and a unit of account so while the Reserve Bank is open-minded about the future, it wouldn't rush to be a leader in adopting a central bank cryptocurrency, he said.
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