History of Australian currency

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The history of Australian currency commences with the first European settlement of Australia on 26 January 1788. At the time, New South Wales was a British colony, and the English currency was in formal circulation, though the supply was insufficient and alternative forms of exchange was resorted to. A national Australian currency was created in 1910, as the Australian pound, which in 1966 was decimalised as the Australian dollar.

Early Australian experience[edit]

The first European settlement of Australia took place on 26 January 1788 at Port Jackson (modern Sydney, New South Wales). One very important British oversight during the colonisation was the provision of adequate coinage for the new colony. In November 1788, Governor Phillip requested a remittance of money from England and sometime in 1790 the Kitty arrived with almost 4500 Spanish dollars. However, the dollars slowly left the colony as they were used to pay for goods brought in by visiting ships.[1]

The colony of New South Wales barely survived its first years and was largely neglected for much of the following quarter-century while the British government was preoccupied until 1815 with the Napoleonic Wars. Because of the shortage of any sort of money, the real means of exchange during the first 25 years of settlement was rum, the access to which was controlled by the officers of the New South Wales Corps, who benefited most from access to land and imported goods.

Of necessity, various foreign coins were in circulation in the colony, and in 1800, in an attempt to put some order into the economy, Governor Philip Gidley King issued a proclamation setting the value of the various foreign coins in the colony,[1] though it did not solve the problem. During this period, to protect the lucrative access to the imported rum, as well as other grievances, the officers, who came to be known as the "Rum Corps", deposed the governor in a standoff in 1808, referred to as the "Rum Rebellion". The New South Wales Corps was recalled soon after. Otherwise, the shortage of coinage persisted. For example, between 1811 and 1816 Governor Lachlan Macquarie paid the contractors who built the Sydney Hospital with 45,000 (later increased to 60,000) gallons of rum.[2]

The 1852 Adelaide Pound (on average) contains 8.75 grams of gold (0.9170 fine) and weighs 0.2580 of an ounce.[3]

The first coinage issued by the colony took place in 1813, when Governor Macquarie ordered the middle of the £10,000 in Spanish dollars sent by the British government be punched out. This process created two parts: a small coin, which was called the dump, and a ring, which was called a holey dollar. One holey dollar was worth five shillings (a quarter of one pound sterling), and one dump was worth one shilling and three pence (or one quarter of a holey dollar). The objective of this exercise was to keep the coins in New South Wales, as they would be valueless elsewhere. In 1817, the first bank, Bank of New South Wales, was established, and issued private banks issued bank notes denominated in pounds. Acceptance of these private bank notes was not compulsory as legal tender, though they were widely used and accepted.

In 1825, an Imperial order-in-council was issued for the purpose of introducing sterling coinage to all the British colonies. This was due to the introduction of the gold standard in the UK in 1816, and a decline in the supply of Spanish dollars, due to the revolutions taking place in Spanish South American colonies. Most of the dollars used had been minted in Lima, Mexico City, and Potosí, which had become part of new Latin American republics, independent from Spain.

In 1852, the Government Assay Office in Adelaide issued gold pound coins. These weighed slightly more than sovereigns. After gold was discovered in Australia, the Royal Mint opened branches in Australia. The Sydney Mint opened in 1854 and issued half sovereigns and sovereigns, with the Melbourne Mint beginning production in 1872. Many of the sovereigns minted in Australia were for use in India as part of a plan that the gold sovereign should become the imperial coin. As it turned out, India was already too entrenched in the Rupee system, and the gold sovereigns obtained by the treasury in India never left the vaults.

State of currency at federation[edit]

At federation in 1901 and for a period afterwards, the currency used in the Australian colonies which became states consisted of British silver and copper coins, Australian minted gold sovereigns (worth £1) and half sovereigns, locally minted copper trade tokens (suppressed in 1881, some state earlier[4]) and private bank notes. In addition, the Queensland government issued treasury notes (1866–1869) and banknotes (1893–1910)[5] which were legal tender in Queensland; and the New South Wales government issued a limited series of treasury notes in 1893.[5] The Perth Mint opened in 1899, at which gold miners would deposit their raw gold for gold coins.

National currency[edit]

City Bank of Sydney in Australia cancelled £20 banknote
Commonwealth of Australia, One Pound (1918).

In September 1910, the federal Labor Government of Prime Minister Andrew Fisher assumed power over currency matters, passing the Australian Notes Act, which introduced a national currency, the Australian pound. Like the pound sterling, the Australian pound was divided into 20 shillings and each shilling was divided into 12 pence, making a pound worth 240 pence. The Act also prohibited the circulation of State notes and withdrew their status as legal tender.[6] It also gave control over the issue of Australian notes to the Commonwealth Treasury.

As a transitional measure lasting three years, blank note forms of 16 banks were supplied to the government in 1911 to be overprinted as redeemable in gold and issued as the first Commonwealth notes. Some of these banknotes were overprinted by the Treasury, and circulated as Australian banknotes until new designs were ready for Australia's first federal government-issued banknotes, which commenced in 1913.[6]

Also passed in 1910 was the "Bank Notes Tax Act" which imposed a prohibitive tax of 10% per annum on "all bank notes issued or re-issued by any bank in the Commonwealth after the commencement of this Act, and not redeemed", which effectively ended the use of private currency in Australia. The Bank Notes Tax Act was repealed by the Commonwealth Bank Act 1945, which imposed a fine for private currencies.

In 1920, the Nationalist Hughes Ministry passed the Commonwealth Bank Act 1920 that repealed the Australian Notes Act and transferred note issuing authority from the Treasury to the Commonwealth Bank. In 1960, responsibility for note printing passed to the Reserve Bank of Australia.[6] The RBA has been producing Australia's polymer banknotes since 1988. Its note printing branch was corporatised in July 1998, as Note Printing Australia, which is a now a wholly owned subsidiary of the RBA.

Initially, the Australian pound was officially distinct in value from the British pound sterling, but Australia's monetary policy was for it to be fixed in value to the pound sterling at parity. As such, Australia was on the gold standard so long as Britain was. In 1914, the pound sterling was removed from the gold standard. Australia returned to the gold standard in 1925 in conjunction with the United Kingdom and South Africa. As in the case of the United Kingdom, there was no return to a gold specie standard, but rather the introduction of a gold bullion standard. This once again formally locked the Australian pound to parity with the pound sterling. The return to the gold standard in association with its parity to the pound sterling, suddenly increased the Australian pound's value (imposed by the nominal gold price) which unleashed crushing deflationary pressures. Both the initial 1914 inflation and the subsequent 1926 deflation had far-reaching economic effects throughout the British Empire, Australia and the world. In 1929, as an emergency measure during the Great Depression, Australia left the gold standard, resulting in a devaluation relative to sterling. Britain devalued the pound sterling against gold in 1931.[7] A variety of pegs to sterling applied until December 1931, when the government set a rate of £1 Australian = 16 shillings sterling (£1·5s Australian = £1 sterling).

During World War II, the Japan produced currency notes, some denominated in the Australian pound, for use in Pacific countries intended for occupation. Since Australia was never occupied, the occupation currency was not used there, but it was used in the captured parts of the then-Australian territories of Papua and New Guinea.[8]

In 1949, when the United Kingdom devalued the pound sterling against the US dollar, Australian Prime Minister and Treasurer Ben Chifley followed suit so the Australian pound would not become over-valued in sterling zone countries with which Australia did most of its external trade at the time. As the pound sterling went from US$4.03 to US$2.80, the Australian pound went from US$3.224 to US$2.24,[9] a devaluation of 30%.

Decimalisation[edit]

1964 ABC report describing the design of the soon to be introduced Australian decimal coins.

In February 1959 the Commonwealth Government appointed a Decimal Currency Committee to investigate the advantages and disadvantages of a decimal currency, and, if a decimal currency was favoured, the unit of account and denominations of subsidiary currency most appropriate for Australia, the method of introduction and the cost involved.[10] The Committee presented its report in August 1960 and recommended the date of introduction of the new system to be the second Monday in February, 1963.[10] In July 1961 the government confirmed its support of a decimal currency system, but considered it undesirable to make final decisions on the detailed arrangement that would be necessary to effect the change.[10] On 7 April 1963 the government announced that a system of decimal currency was to be introduced into Australia at the earliest practicable date, and gave February 1966, as the tentative change-over date.[10]

On 14 February 1966, the Australian pound was replaced by the Australian dollar[11] with the conversion rate of A₤1 = A$2. The dollar comprised one hundred cents.[12]

Under the implementation conversion rate, £1 was set as the equivalent of $2. Thus, 10s became $1 and 1s became 10c. The conversion rate was problematic for the pre-decimal penny since the shilling was divided into twelve pence. An exchange rate of $2.40 = £1 would have allowed for accurate conversion down to the penny, with one penny becoming one cent; however, the government thought it more important that the new currency unit be more valuable than the United States dollar which it would not have been under a 2.4 = 1 ratio.[citation needed]

Amounts less than a shilling were converted as follows:

Pence Accurate conversion Actual conversion
12d 512c 0.417c
6 12d 5 512c 5c
6d 5c 5c
12d (1s) 10c 10c

When pounds, shillings and pence (£sd) were to be replaced by decimal currency on 14 February 1966, many names for the new currency were suggested. In 1963, the then-Prime Minister of Australia, Robert Menzies, a monarchist, wished to name the currency the royal. Other proposed names from a public naming competition included more exotic suggestions such as the austral, the oz, the boomer, the roo, the kanga, the emu, the koala, the digger, the zac, the kwid, the dinkum, and the ming (Menzies' nickname). Menzies' influence resulted in the selection of the royal, and trial designs were prepared and printed by the Reserve Bank of Australia. Australian treasurer and future Prime Minister, Harold Holt, announced the decision in Parliament on 5 June 1963. The royal would be subdivided into 100 cents, but the existing names shilling, florin and crown would be retained for the 10-cent, 20-cent and 50-cent coins respectively. The name royal for the currency proved very unpopular, with Holt and his wife even receiving death threats.[13] On 24 July Holt told the Cabinet the decision had been a "terrible mistake" and it would need to be revisited. On 18 September Holt advised Parliament that the name was to be the dollar, of 100 cents.[14][15]

Australian dollar[edit]

When Australia was part of the fixed-exchange sterling area, the exchange rate of the Australian dollar was fixed to the pound sterling at a rate of A$1 = 8 U.K. shillings (A$2.50 = UK£1). In 1967, Australia effectively left the sterling area, when the pound sterling was devalued against the US dollar and the Australian dollar did not follow. Instead, Australia pegged the Australian dollar to the United States dollar at a rate of A$1 = US$1.12.[16]

Since 1969, the Royal Australian Mint in Canberra has produced all Australian coins. Until 1970, the Melbourne and Perth Mints operated under the jurisdiction of the Royal Mint, as had the Sydney Mint until it was closed in 1926.

On 12 December 1983, the newly elected Labor government, led by Prime Minister Bob Hawke and with Paul Keating as the Treasurer, moved the Australian dollar onto a floating exchange rate.[17] Since the float, the Australian dollar has fluctuated from a low of 47.75 US cents in April 2001 to a high of US$1.10 in July 2011.[17]

On 27 September 2012, the Reserve Bank of Australia stated that it had ordered work on a project to upgrade the current banknotes. The upgraded banknotes would incorporate a number of new future proof security features[18] and include Braille dots for ease of use of the visually impaired. The first new banknotes (of the $5 denomination) were issued from 1 September 2016, and the other denominations were issued in the coming years.[19]

See also[edit]

References[edit]

  1. ^ a b The coinage of the Australian colonies 1788-1909
  2. ^ "The Mint: Surgeons". Historic Houses Trust website. Historic Houses Trust, NSW State Government. Archived from the original on 20 April 2013. Retrieved 27 March 2010.
  3. ^ Cuhaj, George S., ed. (2009). Standard Catalog of World Coins 1801–1900 (6 ed.). Krause. p. 82. ISBN 978-0-89689-940-7.CS1 maint: ref=harv (link)
  4. ^ Pitt 2000, pp. 10–11
  5. ^ a b Pitt 2013, p. 180.
  6. ^ a b c Reserve Bank of Australia, History of Banknotes
  7. ^ "Banknotes of the 1930s". Reserve Bank of Australia Museum. Reserve Bank of Australia. Retrieved 31 December 2015.
  8. ^ The Commonwealth Bank and the note issue: 1920–1960 Archived 1 April 2010 at the Wayback Machine
  9. ^ Historical rates derived from Tables of modern monetary history: Australia, Tables of modern monetary history: Asia (India's section), and Foreign Currency Units per 1 U.S. dollar, 1948-2005, PACIFIC Exchange Rate Service. Each source may contradict one another. The rates above are the "most plausible facts" derived from these web pages.
  10. ^ a b c d Commonwealth of Australia (1963). "Chapter 20. Private finance" (pdf). Year Book Australia. Retrieved 12 Jul 2013.
  11. ^ "Introducing the New Decimal Banknotes". Reserve Bank of Australia Museum. Reserve Bank of Australia. Archived from the original on 27 April 2016. Retrieved 31 December 2015.
  12. ^ Department of Foreign Affairs and Trade (Nov 2009). "Our currency". About Australia. Commonwealth of Australia. Retrieved 12 Jul 2013.
  13. ^ Richard Hughes, "Holt's folly: one royal we rejected", Sydney Morning Herald, 5 June 2013. Retrieved 21 December 2017
  14. ^ "The Royal Controversy". Reserve Bank of Australia Museum. Reserve Bank of Australia. Archived from the original on 27 April 2016. Retrieved 31 December 2015.
  15. ^ The Age, 5 June 2013, Money, p.8
  16. ^ OANDA, Australian Dollar
  17. ^ a b Australian dollar floated
  18. ^ Media Release: R.B.A.: Upgrading Australia's Banknotes http://www.rba.gov.au/media-releases/2012/mr-12-27.html
  19. ^ The Next Generation Banknote Project http://www.rba.gov.au/publications/bulletin/2014/mar/1.html

Sources[edit]