Australia’s embrace of a cashless society has seen coin production at the Royal Australian Mint plummet, with revenues from coin sales down more than 30% compared with last year.
While the mint had budgeted for circulating coin revenue of $85m in 2018-19, the mint achieved a result of just $58m, selling 111m coins to the banks, 106m of which were for circulation.
This was a 9% drop compared with last year; a decade ago the mint produced almost 300m coins.
As a result of the lower than expected production, the mint has halved the amount it provides to government coffers through seigniorage, which is the difference between the face value of a coin sold to the banks and its cost of production.
Financial statements show that the mint paid the commonwealth’s official public account $24.1m in seigniorage in 2019, compared with $49.2m in 2018. A decade ago, the payment was worth $114m.
According to the mint’s annual report, the agency’s off-target estimate of coin demand was based on the findings of research conducted by Colmar Brunton in July 2018.
“The Mint had an expectation that the demand for circulating coin would continue to decline but at a slower pace, as segments of the population resisted the change to a cashless society,” said the mint’s chief executive, Ross MacDiarmid. “This was in fact not the case.
“Updated research conducted in 2019 and indications of forward orders from the banks, suggests that the plateauing effect expected in the prior 12 months may instead occur in the 2019–20 financial year.”
While the mint was still able to record a $11.9m profit, its commercial business revenue fell by 21% compared with the prior year and was below budget by 12%.
The mint also reports that expenses did not drop in proportion to the drop of sales because there was a strong demand for the low denomination such as five cents, which now has a metal cost equal to face value.
At the same time, there was a low demand for the $2 coin which has relatively low expenses compared with face value.
The mint sold 37,200 five-cent coins to “external parties” in 2018-19, compared with just 1,560 the year before.
For the banks, the mint produced about 38m standard five-cent coins, and 8.5m standard $2 coins.
The mint argued in 2011 that the five-cent coin should be scrapped, saying it was too expensive to make and was becoming redundant.
To try to meet the challenge of a shift away from cash, the mint has been ramping up its other commercial activities, including collectible coin ranges. It also manufactures coins for other countries in the Pacific.
Demand for collector coin products grew to a total of $29.96m, an increase of 9.52% on the previous year, with the mint pointing to the success of its special edition AC/DC coins and the Ford and Holden Motorsport Collections.
The mint produced more than 25m circulating coins for Pacific countries in 2018–19, an 8% decrease on the same period for 2017–18.
While acknowledging that there is likely to be “a further erosion of the use of currency” the mint says it expects demand for circulating coins to remain at the same level as in 2018–19 next year.
“With intensifying global economic uncertainty, the demand for physical assets such as gold and to a lesser extent silver as a hedge against uncertainty, has increased,” the mint says.
“This together with some major events and significant anniversaries has created the environment for the mint to potentially break commercial/numismatic revenue records.”
The mint has budgeted for circulating coin revenue of $58m with seigniorage at $33m next year, and commercial revenue of $90m.
If achieved, this would provide a net surplus of $48m – almost 20% up on the 2018–19 year result of $41m.
