Australia Should Follow India and Scrap Big Bank Notes, UBS Says

Australia should follow Indias lead 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 analyst Jonathan Mott said in a note to clients on Monday. Benefits would include reduced crime and welfare fraud, increased tax revenue and a spike in bank deposits, he said.

India last week banned 500-rupee and 1,000-rupee notes as part of a crackdown on tax evasion and the black economy. 

While Australias cash economy isnt as large as Indias, the estimated 300 million A$100 ($76) notes in circulation are rarely seen by the general public, Mott said.

If all those notes were deposited with banks, household deposits would rise by about 4 percent, Mott estimated. That would likely be enough to fill the big banks regulatory-mandated net stable funding ratio and reduce reliance on offshore funding, he said.

Central banks and governments around the world are looking at withdrawing high denomination bank notes as the increasing penetration of electronic payment methods mean there are alternative methods for large purchases. Since 2009, ATM transactions in Australia have fallen 3.4 percent a year, while credit card transactions have increased 7.3 percent a year, UBS said.

The European Central Bank in February said it was considering withdrawing 500-euro notes because of an increased conviction in world public opinion such high-value notes are used for criminal purposes.


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