Cash Provides Certainty in an Uncertain World
In a recent speech, Adrian Orr, Governor of the Reserve Bank of New Zealand, spoke of the continued importance of cash for the ‘security and certainty’ it provides in an uncertain world.
Addressing the Angel Association of New Zealand Summit—an event championing early-stage investment in businesses across the nation—Orr observed physical money provides a safe and trusted anchor of value for the country’s economy while supporting financial and social inclusion.
[Cash] provides choice, supports competition with other forms of money, offers a back-up for users of other means of payments, and allows all users a degree of autonomy and privacy.
Central bank money—directly accessible to the public in the form of banknotes and coins—supports public trust and confidence in private money, offering a one-for-one exchange of value, Orr says. It is ‘liquid, stable, uniform and backed by the state,’ with the importance of its reliability recently underlined by people’s rush to withdraw cash from banks in the weeks leading up to the March 2020 lockdown. Orr notes, in that month alone, around $800 million of cash was issued by the Reserve Bank, which is more than five times the $150 million issued in March 2019. People sought the reassurance of physical money in a time of turmoil.
It is clear that the ability to withdraw money held in bank accounts one-for-one for cash supports trust and confidence in the banking and broader monetary systems.
Orr emphasises the enormous importance of a nation being able to effectively implement monetary policies, with confidence in cash playing a key role thanks to its transparency and the legitimacy granted by its status as legal tender.
Our consultations have confirmed the priority attached by many to the privacy and autonomy provided by cash. We are committed to keeping cash available as long as people need it.
Orr concludes by stressing that the Reserve Bank recognises cash as ‘a safe and trusted value anchor’ and sees the critical role it plays in securing broader social inclusion, and is committed to ensuring cash continues to be accessible and usable for all.