Australia should pursue India’s way and scrap its biggest bank notes, UBS Group AG said.
“Removing large denomination notes in Australia would be good for the economy and good for the banks,” UBS analysts led by Jonathan Mott said in a note to clients on Monday. Benefits will reduce crime and welfare fraud, and will increase tax revenue and a “spike” in bank deposits, he said.
The report came after Prime Minister of India,Narendra Modi last week banned existing 500-rupee ($7.40) and 1,000-rupee notes as part of a crackdown on tax evasion and the black economy that the government hopes will force people to declare unaccounted income and boost tax coffers.
In Australia, 92 percent of all currency by value is in A$50 ($38) and A$100 notes, the majority of which is “hardly seen,” according to the UBS report. Scrapping bigger denominations would boost digital payments in a country where the use of cash payments is continuing to fall, the analysts wrote.
Since 2009, ATM transactions in Australia have fallen 3.4 percent a year, whereas credit-card transactions have increased 7.3 percent a year, UBS said.
If all the A$100 notes were deposited into accounts at the lenders, household deposits would rise by about 4 percent, the UBS analysts said. That would likely be enough to fill the big banks’ regulatory-mandated net stable funding ratios and reduce reliance on offshore funding, they said.