The case for scrapping the $100 note
The $100 note should be scrapped.
It is cumbersome, impractical, imposes a severe cost on small business and is a preferred vehicle for criminals including tax evaders, human traffickers and drug dealers.
Tradespeople are sometimes happy to accept cash for a job and give a discount because they avoid paying tax. Larger notes are preferred.
The Reserve Bank should recall all $100 notes currently in circulation, of course compensating the owners, and shred the lot.
Within 12 months they should be declared illegal accept in exceptional circumstances.
The move would send panic through Australian criminal classes. But anyone who legitimately holds a stash of $100 notes would have nothing to fear.
But first, a question. Do you currently have a $100 note in your purse and wallet?
Chances are you don't.
Do you have a stash of $100 notes in your household safe or knickers drawer?
Chances are you don't. I certainly don't.
In fact, I can't remember when I last had a $100 note, affectionately known as a Kermit (after the Sesame Street frog) because they are distinctively green.
Yet the Reserve Bank estimates $35 billion worth of $100 notes - that's billion not million -are in circulation. That means on average every Australian has about 14 $100 bills.
If you and I haven't got them, who has?
Some are legally held, both in Australia and overseas, by currency punters who believe the Australian currency will remain strong and the A$ will hold its value. It's a hedge against low interest rates and other investment options.
But a more likely reason people hold $100 notes is to hide them from the Australian Taxation Office. Because of their high denomination they are easy to store. They take up relatively little space.
Strip the economy of $100 notes and all sorts of shady people would come forward to cash them in, with all sorts of shady reasons for holding so much cash.
Only banks would be able to exchange the $100 notes so the tax man and the police would have a transparent window to assess who has been holding the money and why.
The likely prosecutions for tax evasion, human trafficking, drug sales or theft would generate tens of millions of dollars of extra revenue for the Government.
Oh, there might be efforts to launder the $100 at race tracks and casinos but the reality is a flood of the Kermits would raise suspicion and prompt awkward questions from authorities.
With $100 notes out of circulation, it will be just that much more difficult for the black economy - the tax dodgers who are being supplemented by higher taxes for honest people - to operate and prosper. It removes the most lucrative target for counterfeiters.
It is not unreasonable, as we move closer to cashless society, to ask whether the $50 note should also be phased out. Perhaps that's another debate.
But the abolition of the $100 would not only be to reduce fraud and criminal activity.
It would also help small business.
It is perfectly legal to buy a $4 cup of coffee or pay a $12 dry cleaning bill by handing over a $100 note.
That means small business must hold change for at least $100 and almost certainly a lot more. That generally requires overnight security or a visit to the bank and also leaves a full till as a temptation for staff and an obvious target for small-time thieves.
These are hidden charges on a small business that might only turn over $3000 in a day.
For consumers, the $100 can also be a liability. There are plenty of places where $100 notes are not accepted, for example automatic ticketing outlets at car parks or railway stations.
Some retail outlets refuse to accept $100 notes, either because they haven't got the change or they fear they may be counterfeit.
No doubt there would be some resistance to dropping the $100 note.
But watch who complains. They may be the biggest beneficiaries to retaining it in circulation.