Evolution of the Australia dollar (AUD)

Australia holds a prominent position in the world of modern national currency by being the first country to introduce a complete system of polymer banknotes. Taking Australia’s lead, several other countries have followed suit by revamping their own currency with banknotes made from plastic polymers.

Birth of the Australian monetary system

Polymer banknotes are only the latest step in the evolution of the Australian dollar. Even the Australian dollar is a relatively new introduction in comparison to the long history of the Commonwealth’s monetary system. When the first European settlers arrived to establish Australia as a penal colony in 1788, very few coins were aboard the first ships.

Whenever the need for a private transaction arose, it was usually completed through the bartering of goods. Rum was a popular bartering instrument in those early days. In some cases, handwritten notes of credit backed by the word of government officials were also used to conduct transactions.

Because of the shortage of coins, steps were taken to prevent anyone from taking the prevalent Spanish dollars off the continent. Around 1810, Governor Macquarie of New South Wales ordered the centres be cut out of all Spanish dollars in Australia. The dollars with the holes in the centre were called holey dollars and in 1813, they were stamped with “New South Wales” and “Five Shillings.” The cores were called dumps, and they were turned into a new coin in the denomination of 15 pence.

By 1817, the Bank of New South Wales had been established and begun to print private banknotes modelled after pounds sterling, but not necessarily with the same intrinsic value. The first denominations were 5 shillings, 10 shillings, 1 pound and 5 pounds. In addition, paper tokens were manufactured for denominations of 2 shillings and lower. In 1825, the British government stepped in and officially imposed the pound sterling standard, and mints to produce English coins were set up in Australia.

Australian federation

After Australia became an independent nation in 1901, the Australian government became responsible for the currency system. Nine years after federation, in the term of Prime Minister Andrew Fisher, the Australian Notes Act of 1910 was passed. This Act prohibited the use of state-specific banknotes and imposed a 10 per cent tax on all private banknotes, effectively ending their use.

The Australian Notes Act also called for a federal monetary system to be established based on the British pound sterling system wherein one pound was divided into 20 shillings, and one shilling was broken down into 12 pence. The first Australian pound banknotes were printed in 1913. While the Australian pound was a separate currency, its value was pegged to the pound sterling until 1931. Great Britain went off the gold standard in 1919, and Australia followed suit. However, Great Britain went back on the gold standard in 1926, deflating the value of the pound sterling. The Australian pound’s peg to the pound sterling was removed in 1931 to provide some relief from the deflation.

The call for decimalisation

In the early 1960s, a movement had begun to convert Australian currency to a decimalised system, as much of the world was already doing. Sir Robert Menzies, the Prime Minister and an influential monarchist, pushed for the new currency to be called the Australian royal. Designs were laid out and test printed by the Bank of Australia, but public outcry over the name forced the change to the Australia dollar.

The Australia dollar was officially introduced on 14 February 1966. With the introduction of the Australia dollar came the officially detachment from the pound sterling. The Australia dollar was introduced at a peg to the US dollar. In 1983, the Australia dollar was unpegged and allowed to float on the international currency exchange.

At introduction, the first Australia dollar banknotes were issued in denominations of $1, $2, $10 and $20, with a $5 note issued the following year and the $50 note introduced in 1973. By 1988, the $1 and $2 notes were both replaced by coins.

The new polypropylene polymer banknotes were introduced by Australia in 1988 to mark the bicentennial of the settlement of Australia and to prevent counterfeiting. The polymer notes were printed in denominations of $5, $10, $20, $50 and $100.