A massive surge in the number of bank notes in circulation that followed the GFC appears to be over.
Demand for folding money rocketed in between 2008-2009 when the value of $100 bills in circulation increased by $2.4 billion, according to the Reserve Bank of Australia.
Michael Knox, RBS Morgans Chief Economist said the cash grab happens in times of recession when people feel frightened.
“People like to keep their money in their socks, it’s the security of having cash during a situation of high risk,” he said.
The central bank saw strong growth in demand for banknotes following the global financial crisis in 2008 followed by two years of subdued growth.
While the rush to stuff cash under mattresses may have subsided the value of banknotes on issue jumped 7.1% to 1.1 billion in the last financial year, showing demand is now similar to pre GFC levels.
Knox said as you come into a recovery period where interest rates fall people have less incentive to keep their money in the bank and get interest.
“People take the cash out of the bank to spend it and so credit payments should rise at the same time as interest rates fall.”
Pockets are mostly being lined with $50 and $100 bills, making up 91 per cent of the value of banknotes on issue according to the RBA’s annual report.
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