Over the past few months we have been tracking the passage of the Cash Restrictions bill, which proposes to restrict cash transactions between companies and individuals over $10,000. Our post on the Real Issues surrounding the Cash Ban is our most watched show, ever.
As we highlighted recently, following the December Senate hearings, there is no clear rationale for the $10,000 dollar limit, it will have limited impact on money laundering and gang finances, and yet will remove a right we currently have to use cash as we please, thus narrowing the definition of legal tender. Some will be effectively debanked. And there is no clear business case at all. See our Post the Cash Ban Cowards Cannot Hide The Truth.
Plus the recent bush fires underscored the need for cash as an alternative to electronic payments see my post “Another Reason to Smash the Cash Ban”, where I argue that cash in a crisis is the only game in town – and the claimed protections proposed in the bill are unsatisfactory.
This bill has already been passed in the lower house, during a pretty shameful and poorly attended debate, but the Senate determined to investigate it before allowing it to pass. Good on them. As well as the minor parties, Labour supported this inquiry which is due to report on the 7th February. My suspicion is that the report has already been written, ahead of another hearing which is tentatively scheduled for 30th January in Sydney.
Things have gotten more complex because the Labour party member Senator Gallagher, who asked some important and penetrating questions in the first round of hearings, has announced that he will take no further part in the review due to ill health. We wish him well.
As a result, it is not clear yet whether Labour will offer up another Senator to continue the investigation, or whether this effectively marks the end of any attempt to stop its passage. Indeed the 30th hearing is now not ever certain.
All eyes are now on Labour, who appear from a distance to be disengaged on the issue, despite their earlier support for the Senate inquiry.
So I wanted to highlight three important points.
First, the reduction of our personal freedoms to use cash as legal tender is a big deal. The $10,000 limit will be eroded by inflation over time and may be reduced in a subsequent bill to $2,000 or less, as has been done in a number of other countries.
Second, the structure of the bill is a total restriction on cash transactions above $10,000 for any purpose, then diluted by a parallel regulation, which excludes for now cash withdrawals and payments from a bank, transactions between individuals for non-commercial purposes, and payments using cryptocurrencies. However, all these exclusions can be changed at a stroke of a pen, without any further direct Parliamentary intervention. This leaves the door open to restricting cash transactions more widely, for example in a banking crisis, including restricting cash withdrawals, as happened in the Bank of Cyprus crisis a few years back. And cryptos could be included later, if their use expands. The $10,000 limit is actually in the bill.
Third, the authorities carefully steer around the recent IMF papers and blogs, where they discuss the need to take interest rates firmly into negative territory, to react to a financial crisis. Typically, a cut of around 4% would be required they say. Given we are already have a 0.75% cash rate, negative rates may follow. But in a negative rate environment, people will pull funds from the banking system, and hold cash, as their value will not be eroded, relative to negative rates, where depositors must pay for the privilege of keeping money in the bank. The link to monetary policy was discussed in the Black Economy Task-force papers, yet has been downplayed since in official circles.
So, the risks of the cash ban being made law are real.
Which begs the question, what can we do if we want to resist this bill?.
Well, first it is not too late to contact your members and senators and make sure they are aware of your concerns, and I think we should focus on Labour Party members – on two fronts, demanding they nominate a replacement for Gallagher, and that they resist the bill. Make sure they know you are opposed to the bill. Contact details for every member and senator are available in the Government website.
Second, I think it is worth writing to your local newspapers, and highlighting the issues around the cash ban. I made an earlier show when I went through all the main points – see “What I Said to The Senate On The Restrictions On The Use Of Cash Bill” in my video, and on the DFA blog. I included a series of arguments which you can leverage.
Third, please share this post via your social media channels to widen the awareness in the community of this issue. I still find many people are unaware of the implications of this bill – and because they never make big cash payments, do not see it as an issue. But I want to underline that personal freedoms are being eroded again, on the flimsiest of arguments; that we will be trapped inside the banking system, and thus forced to pay for banking services; and that the Senate has the ball but might just hook it if they are allowed to.
We literally have less than 3 weeks now to make a difference. Our civil liberties depend on it….
