As Australia shifts more towards becoming a cashless society, coin production at the Royal Australian Mint has fallen drastically.
Revenues from coin sales were down more than 30%, when compared to last year, reported The Guardian on Monday.
The Australian mint had forecast coin sales to reach $85 million during the 2018-2019 period, but failed to hit the target recording only $58 million in sales, with 111 million coins being delivered to banks, and 106 million distributed for circulation.
This marked a 9% decline compared to last year, while the mint was recorded having distributed almost 300 million coins ten years ago.
Due to the lower than expected production, the mint has slashed by half the amount it offers to government coffers through seigniorage, which is the difference between the cost of production of a coin, and the value it is sold at to lenders.
According to financial statements, the mint paid $24.1 million in seigniorage to the commonwealth’s official public account in 2019, compared to the $49.2 million paid last year. The payment was worth $114 million ten years ago.
The mint’s annual report stated that the agency’s off-target figure of coin demand was grounded on data from research compiled 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 Ross MacDiarmid, the mint’s chief executive.
“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.”
Although the mint still posted a record profit of $11.9 million, commercial business revenue plummeted by 21% compared to the previous year and was below budget by 12%.
The mint also noted that expenses did not fall when compared to the drop in sales due to there being strong demand for the low denomination such as five cents, which has metal cost equivalent to its face value.
On the other hand, there was a low demand for the $2 coin which has low expenses compared to its face value.
The mint sold 37,2000 five-cent coins to “external parties” during the 2018-19 period, versus 1,560 the year prior.
The mint delivered around 38 million five-cent coins to banks, and 8.5 million standard $2 coins. Back in 2011, it stated that the five-cent coin should be removed, arguing that it was too expensive and was becoming redundant.
In a bid to move away from cash, the mint has been working on other commercial activities, such as collectable coin ranges. It also produces coins for other countries in the Pacific.
Demand for collector coin products rose to a total of $29.96 million, marking a surge of 9.52% compared to the previous year. The mint cited its success to its limited-edition AC/DC coins and the Ford and Holden Motorsport Collections.
Over 25 million circulating coins for Pacific countries were produced by the mint in 2018-19, an 8% decline from the same period the previous year.
The mint said it forecasts demand for circulating coins to remain steady at the same level it was in 2018-19 next year, all the while being aware of the possible “further erosion of the use of currency.”
“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.”
For circulating coin profits, the mint budgeted $58 million with seigniorage at $33 million next year, and commercial revenue of $90 million.
If it reaches its forecasts, this would lead to a net surplus of $48 million, nearly 20% higher than the $41 million in 2018-19.