What is the future of cash?

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Australia will require some shops selling essential items to accept cash from 2026, and the Reserve Bank is not ruling out a policy response to safeguard cash in New Zealand.

The Australian government will introduce a mandate that requires businesses selling items such as groceries medicines and fuel to accept cash from January 1, 2026.

It will also phase out the use of cheques.

Australia's cash use has declined quickly - in 2007 it accounted for 69% of transactions, but in 2022 only 13%.

New Zealand's cash use has followed a similar trajectory.

Reserve Bank manager of money and cash policy Robbie Taylor said about 7% of people still used cash on a regular basis to pay for everyday things.

New Zealand has already phased out the use of cheques.

Taylor said shops in New Zealand had to let people know if they did not accept cash, before customers started to shop or receive services.

He said a paper in 2021 had identified a range of options for addressing cash system challenges, including a requirement similar to Australia's.

"The Reserve Bank is continuing to monitor cash acceptance and exploring whether a policy response is needed."

He said the paper included other options to support the cash system, and some were being explored through the Reserve Bank's community cash service trials.

"We are concerned about the decline in cash availability, particularly in rural New Zealand. We know from communities that access to cash is an important issue and this was reinforced by recent severe weather events, like Cyclone Gabrielle, when Eftpos and bank money machines were out of action because of widespread power outages."

The Reserve Bank has also been consulting on plans for a digital currency, which would be a digital form of cash but would not replace it.

Massey University banking expert Claire Matthews said it was not obvious that a mandate such as Australia's was needed in New Zealand.

"Most businesses will accept cash, particularly larger businesses, because they want the sale.

"I know there are some that don't, and the number is growing, but most of those are smaller businesses that would appear not to be captured by the Australian rules anyway.

"Interestingly, we have recently had a café open locally that will only accept cash for payment."

Payments NZ chief executive Steve Wiggins said it was a "conundrum" that as cash use had declined, the amount of cash in circulation had increased.

"Then the question goes 'what are we using all this cash for?' It comes down to really trying to figure out whether there are legitimate reasons or not."

There was $8.6 billion in circulation this year, up from $8.5b last year and $7.3b in 2020.

Wiggins said Payments NZ's survey asked people why they liked using cash and people often said it was useful to pay tradespeople.

"AKA code for tax evasion."

He said New Zealand's experience had been that charities had been most affected by the phase-out of cheques.