Modi Effect : Australia to ban $100 note to crackdown black economy

modi effect australia to ban 100 dollar

Australia to follow in the footsteps of India under Modi effect by abolishing the country’s highest-denomination banknote in a bid to crack down on the black money.

A taskforce, set to be revealed at next week’s midyear budget update, will consider the future of the $100 note and bans on cash payments over a certain level among other measures.

The move would draw on the experience of countries like France, where cash payments of over 1000 euros (AU$1416) have been banned.
Australia’s $100 note could soon fly the coop.

But in a News Corp poll more than two-thirds of respondents revealed they want Australia’s largest single cash currency retained.

Just after 2.30pm AEDT, more than 1100 readers had voted in favour of keeping the $100 banknote — or 66.75 per cent of respondents.

A further 466 readers (or 27.43 per cent) had voted to ditch the note while 99 respondents (5.82 per cent) were unsure.

Revenue and Financial Services Minister Kelly O’Dwyer told Fairfax on Wednesday the $100 note was in the crosshairs.

“We’ve got three times as many $100 notes in circulation as $5 notes and we’ve got about $30 billion worth of $100 notes in circulation at a time when increasingly we have people more and more using electronic payment systems,” she said.

“It does beg the question ‘why’ and that’s something the black economy taskforce will focus on.”
Australia has three times as many $100 notes in circulation as $5 notes.

The plan is part of a government move on cash-in-hand jobs and other untaxed income with a new task force established to find billions of dollars for budget repair.

It’s estimated the black economy, or hidden economy of untaxed payments, could amount to about $21 billion or 1.5 per cent of GDP.

“We are talking about very significant revenue. I won’t put a specific number on it … but even if you got a reasonable percentage of that we are talking billions of dollars,” O’Dwyer said.

The taskforce will be headed by former KPMG global chairman Michael Andrew, the minister said.

It comes as Treasurer Scott Morrison is set to issue an appeal for Australia’s AAA credit rating today by outlining how the government is exceeding rating agencies’ expectations.

The Australian Financial Review reports the Treasurer will urge agencies to take into account the government’s moves to repair the budget in a speech to the Australasian Finance and Banking conference.

Mr Morrison will also touch on the importance of significant amount of foreign debt to Australia’s prosperity.

Ratings agencies have warned they won’t accept unrealistic forecasts in next week’s budget update.

India last month demonetised the country’s two highest-denomination banknotes in a bid to crack down on “black money”.

Prime Minister Narendra Modi sent shockwaves through the country by announcing on November 8 all 500 rupee ($10) and 1000 rupee ($20) notes — some 85 per cent of all bills in circulation — would cease to be legal tender within hours.

This week, Venezuela joined suit, with Venezuelans rushing to trade in their 100-bolivar bills after President Nicolas Maduro said he was eliminating the nation’s highest currency denomination in an attempt to fight speculation and currency hoarding.

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