RBA Defends Proposed Cash Ban
A controversial bill to ban cash payments of $10,000 and impose a two-year jail sentence if violated is being widely scrutinised.
The proposed cash ban bill passed the Lower House late last year and was due to start on January 1 – but it won’t become a law until a Senate inquiry looks into it.
The Federal Government has defended the bill, saying it intends on stamping out the ‘black economy’ – tax evasion, money laundering and other crimes – but people are instead saying the government should have no say in how people use their cash.
The inquiry has seen thousands of submissions from stakeholders, with some expressing concerns over the bill leaving customers bank deposits vulnerable to negative interest rates.
But the Reserve Bank’s head of payment policy, Tony Richards, rejected that notion.
‘With respect, I think some of those concerns that you’ve alluded to are a little far-fetched,’ Richards told the Senate inquiry in Canberra last month.
He noted that RBA Governor Philip Lowe had already stated negative interest rates were extremely unlikely, despite the record low cash rate sitting at 0.75% with economists predicted more cuts to come this year.
‘There are almost no examples of negative interest rates for household deposits in those few countries that have had negative policy rates,’ Richards said.
There have been multiple statements and public papers by the international body in charge of financial stability, the Washington-based International Monetary Fund (IMF) have also discussed the benefits of cashless transactions.
Richards said the notion of cash being removed from circulation might be ‘far-fetched.’
‘The Reserve Bank and the Government have both said in different contexts recently that cash is a very important part of our payment system and our economy.’