The five-cent coin ... makes no cents?

Since 1992, the five-cent coin has served as Australia’s lowest denomination coin. In recent years, however, the five-cent has been demoted to either a) a coin that we try to get rid of by shoving down the coin slots at self-checkouts, b) a coin that we try to get rid of by making our annual coin deposit at the bank and c) a coin that we try to get rid of at myki and vending machines… before we’re interrupted by the reminder that they won’t accept the little guy. Despite being a nuisance to businesses and consumers, its production occurs at a loss.[1] So, is there really any sense to holding onto our treasured five-cent?

It takes six cents to produce a five-cent coin

Perhaps the most compelling reason for abolishing the five-cent coin is that it costs too much to produce. This was first realised in the early 2000s, when inflation in the Australian economy led to very serious debates as to whether it was time for the five-cent to go. Not long before that, Australia had gotten rid of its one and two-cent coins. Coupled with volatile mineral prices that caused the five-cent to cost a little too much to produce, the case for its abolition started to make perfect sense.[2] This was indeed the key reason that led New Zealand to retire their five-cent coin back in 2006. Although it is true that inflation has actually fallen to concerningly low levels in recent years, the five-cent still costs about six cents to produce.[3] When questioned on the issue, Prime Minister Scott Morrison rationalised the government’s lack of action on the fact that not enough people were vocal about the issue.[4] While it is true that Australians do have more important causes to defend, the government should not continue to fund an inefficient coin that does little more than weigh our wallets and pockets down – especially at a time where it is struggling to find ways to finance its budget.[5]

A nuisance for all

Would anyone really miss the five-cent? You would think that businesses would be in defence mode in order to ‘earn that extra coin’. This is simply not reflected in reality. In one article in support of removing the five-cent coin, Angus Kidman wittingly asserts that ‘You can give any shop up to $5 in 5 cent pieces and they’re not legally allowed to refuse it, but if you try that with your local coffee shop too often I bet someone will end up sneezing in your latte.’[6] With the move towards a tap-and-go society, all forms of hard currency are beginning to negatively hold back business efficiency, with the five-cent being the worst offender.[7] One survey found that 93% of Australians have thrown away a five-cent coin simply because it was too annoying to carry. Loose change has become so hard to manage that Australians are losing a startling $38m every month by misplacing coinage, an excessive amount of money that could be better spent on stimulating our tired economy.[8] There is only one real reason as to why we should even consider sparing the death of the five-cent coin and that relates to the fact that charities and not-for-profit organisations depend heavily on lower denomination currencies.[9] Charities that focus on collecting five-cent coins (such as the Love Your Sister’s Big Heart Project) have become increasingly popular for the appeal of helping Australians donating their annoying five-cent coins towards an altruistic cause.[10] Indeed, a feasible solution is to allow five-cent coins to continue acting as legal tender but cease any further production.

The cashless society

The abolition of the five-cent coin raises an inadvertent conundrum: do we round up or round down?[11] Rounding up would mean that consumers would foot the bill of higher prices while rounding down would mean that businesses miss out on that extra coin.[12] While this is definitely something to think about, it won’t make much of a difference when we contemplate just how much purchasing and selling transactions have evolved since electronic transactions were introduced. With the efficiency advantages of credit cards, tap-and-go transactions and online shopping, it seems that hard currency is losing its purpose.[13] Indeed, the ability of electronic purchases to be charged to the penny means that businesses and consumers are less affected by the whole rounding conundrum. On a more general basis, the future of cash in modern society is something that certainly continues to attract much debate. Although there are arguably still good reasons to hold onto cash (especially of larger denominations), this can barely be justified in the case of Australia’s ‘most shunned shrapnel.’[14]

[1] Thomsen, S, 2016, ‘Scott Morrison squibbed it on an issue that’s costing taxpayers money – the 5-cent coin,’ Business Insider Australia, May 5, https://www.businessinsider.com.au/scott-morrison-squibbed-it-on-an-issue-thats-costing-taxpayers-money-the-5-cent-coin-2016-5

[2] Hirst, D, 2009, ‘Get your 5c worth before it goes out of circulation,’ The Sydney Morning Herald, May 23, https://www.smh.com.au/national/get-your-5c-worth-before-it-goes-out-of-circulation-20090523-bihk.html

[3] Thomsen, S, 2016, ‘Scott Morrison squibbed it on an issue that’s costing taxpayers money – the 5-cent coin,’ Business Insider Australia, May 5, https://www.businessinsider.com.au/scott-morrison-squibbed-it-on-an-issue-thats-costing-taxpayers-money-the-5-cent-coin-2016-5

[4] Grudnoff, M, & Richardson, D, 2018, ‘Australia, we need to talk about revenue,’ The Australia Institute Discussion Paper, https://www.tai.org.au/sites/default/files/P612%20Australia%2C%20we%20need%20to%20talk%20about%20revenue%20%5BWEB%5D.pdf

[5] Kidman, A, 2011, ‘Why It’s Time To Kill The Five Cent Coin,’ Lifehacker, May 17, https://www.lifehacker.com.au/2011/05/why-its-time-to-kill-the-five-cent-coin/

[6] Glance, D, 2017, ‘Australia may be closer to being a cashless society but it won’t happen by 2020,’ The Conversation, Mar 28, https://theconversation.com/australia-may-be-closer-to-being-a-cashless-society-but-it-wont-happen-by-2020-75258

[7] Zhou, N, 2017, ‘Keep the change, please: Australians reject coins as not worth the weight,’ The Guardian, Oct 6, https://www.theguardian.com/business/2017/oct/06/keep-the-change-please-australians-reject-coins-as-not-worth-the-weight

[8] Truu, M, 2018, ‘Why are we stubbornly holding onto a coin that is almost useless?’ The Sydney Morning Herald, Nov 30, https://www.smh.com.au/business/banking-and-finance/why-are-we-stubbornly-holding-on-to-a-coin-that-is-almost-useless-20181111-p50feb.html

[9] Doherty, M, 2017, ‘Connie Johnson’s Big Heart Project for Love Your Sister shines brightly in Canberra,’ The Canberra Times, May 11, https://www.canberratimes.com.au/story/6033189/connie-johnsons-big-heart-project-for-love-your-sister-shines-brightly-in-canberra/

[10] Powell, D, 2016, ‘Is the five cent coin on its last legs? What scrapping it would mean for retailers,’ Smart Company, Nov 7, https://www.smartcompany.com.au/industries/retail/five-cent-coin-last-legs-scrapping-mean-retailers/

[11] McCowen, S, 2016, ‘Why prices will rise if five-cent coin is scrapped,’ Money Mag, Nov 23, https://www.moneymag.com.au/prices-will-rise-if-five-cent-coin-is-scrapped

[12] Glance, D, 2017, ‘Australia may be closer to being a cashless society but it won’t happen by 2020,’ The Conversation, Mar 28, https://theconversation.com/australia-may-be-closer-to-being-a-cashless-society-but-it-wont-happen-by-2020-75258

[13] Hirst, D, 2009, ‘Get your 5c worth before it goes out of circulation,’ The Sydney Morning Herald, May 23, https://www.smh.com.au/national/get-your-5c-worth-before-it-goes-out-of-circulation-20090523-bihk.html