What does the future of money look like without cash?

Sascha: [00:00:02] From Equity Mates Media This is the Dive, the podcast that says who the business news needs to be All business. I'm your host, Sascha Kelly. It's a two parter today. Instead of deciding between two stories, we thought, why not both? So here's what we're talking about. The Nobel Prize for economics has just been announced, and for the third time ever, it's been awarded to a woman. Professor Claudia Golden has won for her extensive research and academic writing on historical trends in gender equality. I'm going to be joined by economics correspondent from Capital Brief, Jennifer Duke, who's going to tell me more about her research. And then recently, there's been a lot of talk about a cashless future. Macquarie Bank announced that they'd be phasing out physical cash and cheques from early next year, and the Aussie Government has given us a little more time. But they've also added no more cheques by 2030. It's Monday, the 16th of October, and today I want to know what does the future of money look like without physical cash? To talk about this subject today, I'm joined by Andrew Cornell, the associate editor, banking and Finance at Capital Brief. Andrew, welcome to the dive. 

Andrew: [00:01:17] Thanks very much, Sascha. Nice to be here. 

Sascha: [00:01:18] Excellent. Well, there's been a bit of noise lately questioning what the future of cash looks like with the Australian government announcing that they're going to be phasing out cheques by 2030 or what made headlines recently Macquarie Bank declaring they're going to be phasing out cheques and cash from next year.

Audio Clip: [00:01:35] The bank is rolling out cashless branches in Sydney, Melbourne and Brisbane, with customers unable to access their money over the counter.

Sascha: [00:01:43] Before we look into the future, I think it's really worth examining what our expectation of money is at the current time. You write, our idea of money is both quite modern and typically limited. Can you explain to me what exactly you mean by that?

Andrew: [00:01:59] Well, we think about money. Like if you or I talk about money or talking about money outside, we tend to talk about dollars and cents and physical currency, but it's actually mainly digital. Even in our lives today, when we go shopping, you know, even if we're using a credit card, it's digital. If we're using our phones, it's digital. If we get a home loan, what happens is we don't actually get a loan. What we get is a deposit in our bank account that the bank gives us. And that's purely digital money, essentially, that the bank is created from nothing. So when we talk about money, we're talking about, oh yeah, I've got a $20 bill or I've got a 20% piece or whatever. It's a small amount of what really is money. And then that money, it's over history. It's being well, it goes right back to calorie shells, I suppose we've all heard about. That is a really oily form of currency. But then there was some civilisations where money with giant rocks, you know, money is a sort of agreed form of value.

Sascha: [00:03:01] Hmm. I think that's a really interesting point that you make that, you know, we do think of money as this tangible thing, but it's such an interesting thing to think about, and most of the largest sums of money in our lives is kind of out there in the aether, in the digital form. And Australians using cash in payments has dramatically decreased. The RBA found that cash payments made up just 13% of exchanges and it only represents 8% of the value of money that's out there in our lives. And the organisation has described what we call a self-reinforcing cash use cycle. Can you describe to me what this cycle means? 

Andrew: [00:03:41] Well, it's a chicken and egg thing, we don't know. But to start at one point, the cash that we've got you've got in your purse or I've got the physical cash, where does it come from? But usually comes from an ATM or maybe from the check out at the supermarket. How does it get to the ATM? It's going to be shipped there by a truck. Where is the money that's in the truck coming from? Well, it's coming from a cash supply, which in some cases is actually the RBA, but in most cases is a commercial bank. How are those supplies stocked then? And essentially, we're getting to the point where it comes from the mint, where it's printed, where the money is actually manufactured. But at all those levels there's a commercial operation. It costs money to run an ATM. It costs money to ship the cash around and not just the fuel in the truck, but the massive security costs of cash. All these things cost money. They're not done by the government. They're done by private companies. So we've already seen the number of items decline. Why are they declining? They're declining because we're not using cash as you just run through. So there's not as much of a business case. If there's fewer items, then the security trucks that. Stop them, don't have this much work. So we've already seen rationalisation there. But then of course, if there's fewer items, if it's harder to get cash, if it's more expensive to get it, pay more at the ATM, more people are going to go, All right, I'll use my phone or I'll use something else. Therefore, there's even less cash. So that's that idea of there is a cash cycle, but it's self-reinforcing to the extent that if everyone wanted cash, then it would be a very profitable business. Less and less people want cash. Less and less profitable. Less and less availability, less people using cash. So that's the sense that we're getting. 

Sascha: [00:05:38] Yeah. And so when you start to think about moving towards a digital currency or phasing cash out, you have to bring up the conversation of defile, you know, crypto currencies and the technology that they represent, which, you know, in a sentence is distributed ledgers representing the cash as opposed to the existing financial architecture. And this is added, of course, pressure on the survival of physical cash. Is crypto technology a viable alternative to what we have now? And you point out that for many authorities it's not. Can you elaborate on why that's the case?

Andrew: [00:06:17] Yeah, and look, there's a couple of elements here. Things will evolve. So we're already seeing central banks, official suppliers of cash using distributed ledger technology, using essentially a form of crypto currency. The issue is if we step back and say, well, what is this money with the physical notes and coins, we agree. We can see the coins, we can see the notes, we agree it's money with credit cards, with the other money that's coming from banks it's backed by. Even if we don't understand it, we know it's backed by the government at some point by a central bank. But when we get to something like Bitcoin or other cryptos, who's backing it? What happens if something goes wrong? So there's a lot of different ways of looking at how we define money. But in most common usage, money is going to be what they call singular. So if you've got a certain representation of money in whatever form and I've got one, the two are the same. You know, your $1 is the same as my $1. The probably crypto, because there's no central authority is that that's not the case. In a technical sense. It could be worth more somewhere else and it is worth it. The other thing with money is, and this is why people hoard cash and they are hoarding cash, you know, there's a lot of big dollar bills in in sort of captivity that aren't being circulated. People hold that because it's a store of value. Your hundred dollar note is going to be worth 100 bucks, give or take inflation when you get it out from under your mattress in six months time or ten years time with crypto, you don't know whether that's the case. And equally, why do we have money? Well, it's an exchange of value. We use it to buy our coffee or we use it to buy our house or something like that. Again, with crypto, there's not enough acceptance and there's not enough people with it to make it a viable form of transacting equally. We I don't think we'll see dollars and notes disappear because where they've tried it in Sweden, where quite close, the social backlash has been enormous and people just don't want to give it up and no government is going to do it while it's politically unpalatable. But on top of that, we're not at a system where it's foolproof at the moment. The other day, for whatever reason, my credit card stopped working and I realised that if I hadn't had 30 bucks in my wallet would have been standing there at the checkout with nothing to do. So at the moment there is there is still a demand for physical cash and there's still no government, I think, brave enough to just get rid of it.

Sascha: [00:08:54] Yeah. So is that why you think why this conversation keeps coming up, even though physical cash is declining in terms of in the actual circulation and as a percentage of value, is that why it still matters that it's out there? Is the psychological and social element to it? 

Andrew: [00:09:11] I think at the moment it is. I think that's a greater challenge for those who sort of have an ambition for a cashless society. That's a greater challenge than the number of outages, because one of the trials that the Reserve Bank of Australia was doing recently was what do you do in disaster situations like fires and floods where they go, Oh well, telecoms is down, we can't use it well in our situations, it's hard to get cash as well. So they've actually looked at how can we use these technologies offline, in which case the cashless alternative is actually more secure than the cash alternative in that case. So I think there will be a lot of work done on that front. But, you know, particularly for, you know, the older generation, the idea of giving up cash completely, it's just totally. Typically you wouldn't win any votes with it. 

Sascha: [00:10:02] Yeah. Which as much as we want to have these conversations in a vacuum, they're all interconnected, aren't they? Andrew, thanks so much for your time today. It's been a fascinating discussion.

Andrew: [00:10:12] Great to chat. Thanks, Sascha. 

Sascha: [00:10:14] Kind of left with more questions than answered, but really interesting to examine where the psychological and the political overlap with the actual operations of our money system. I know this is a conversation that isn't going anywhere. We're going to take a quick break and then when we get back, I'm really excited to dig into this one with Jennifer. We're going to talk about Professor Claudia Golden's research, the phenomenon that she discovered that meant she was awarded the 2023 Nobel Prize for Economics Science.

Audio Clip: [00:10:48] Hello? Hello. Am I speaking with Claudia Golden? Yeah, I'm calling from Nobel Prize dot org. My name is Adam Smith. Many congratulations on the award. Thank you very, very much. Tell me, how did the news reach you? The news reached me by phone this morning when I received a call and I was awakened by it very pleasantly. That is a nice way to be working. I imagine you wake up pretty fast with that news. Yes. 

Sascha: [00:11:16] Welcome back to the Dive. The Nobel Prize for economics has just been announced and perhaps the third time it's been awarded to a woman. Professor Claudia Golden has won for her extensive research and academic writing on historical trends in gender equality. I'm really excited to dig into this one and to talk about this. I've got Jennifer Duke, who's returning. She is the economics correspondent at Capital Brief. Jennifer, welcome to the dive. 

Jennifer: [00:11:42] Thank you very much for having me back. 

Sascha: [00:11:44] It's an exceedingly complex phenomenon, of course, and I'm not going to get you to unpack all of that in 10 minutes. But it's very existence of the gender pay gap has been I mean, I've seen so many studies on social media that I've witnessed. So I know it's an incredibly contentious topic. So, Jennifer, can you tell me a bit more about Claudia's research and specifically drill down into this one factor that she's identified, which I find particularly interesting? Can you tell me more about greedy work. 

Jennifer: [00:12:16] Yeah, no problem. So what Claudia found was that there is this thing called greedy jobs. So even when you're controlling for things like someone's education background, their work experience, there's still this gender pay gap. And this factor behind it might just be greedy work. And that's when you have an employer who over values overtime basically. So they'll say something like this is your salary and usually you're expecting it sort of 9 to 5. But jobs where you're expected to really grind and do like 25 to 50% more hours, they will pay way in excess of 25 to 50% on top. And while on the surface, that kind of seems pretty gender neutral. Actually, it's not because women are always 25, 50% extra hours to put in. And that's because at the moment, so often, particularly in straight couples, there's this situation where women are usually the ones who are doing extra childcare. They're usually ones looking up to elderly parents, but usually still the ones doing the cleaning and the cooking and possibly the ironing, things like that. And so when you're then factoring all that in and all the unpaid work that they're doing, they don't have the time to go and chase these highly lucrative, greedy jobs. And that was what Claudia found, which is pretty fascinating. 

Sascha: [00:13:19] Yeah. And she compared it with women who are in same sex relationships as well, and found that there was a difference as well in that greedy work. 

Jennifer: [00:13:29] Yes. Claudia's done a lot of different research. One of the interesting elements around this sort of the same sex relationship aspect, and this is something that's kind of firmed up in the US. There's a little bit of research in Australia is that for couples where it's women and women, they don't seem to experience the gender pay gap quite so significantly as the straight peers. So I find it really fascinating because it's one of those things where say if you go straight into a straight relationship, there's usually kind of unwritten rules around who's going to be doing certain things, like taking out the trash and stuff like that. As much as we like to think that we've kind of moved a long way from where things used to be, clearly that still exists in some component parts for gay couples or for bisexual couples. Usually those are written rules. There's unwritten rules don't exist so much, and so there is kind of more of a chore balance, I suppose. But the interesting thing about what Claudia found about great work is that it kind of affects anyone, regardless of whether you're male or female. Because if you think about it, if there's a certain number of chores and needs to be done, that's up to a couple how they split that up. But if you're split 5050, perhaps both of you then don't have time for a great job. And both of you then miss out on that extra earnings. Then as a household, you're missing out on the extra income overall. So sort of like making the best decision as a household unit. And often we do find, though, that that becomes unwritten, implicit that the man goes on and does that job and gets that extra income. 

Sascha: [00:14:51] But also what I found so fascinating about reading your piece is that she's identified that the recent pandemic, you know, there is a little bit of a silver lining when it comes to this grading work because our expectations of how we interact with both our workplaces but also how we exist in the home and in those relationships has shifted. What exactly has she identified?

Jennifer: [00:15:14] So what was really interesting is that she thinks that maybe greedy workers are a little bit less greedy now, which we should all be pretty grateful for, I think. I think most of us can experience that to some extent. So if you're having work that allows you to be maybe a lot more flexible with where you're working, then you don't have that commuting hour that you need to think about. And so that becomes time that you can choose to then spend on household chores or to spend at work and doing that and doing those things. And so that extra time actually allows women in particular the opportunity to maybe pursue some of those greedy jobs. But it also means that employers may. B rethinking work life balance a bit for their staff, reconsidering how they should maybe be trading people. And also, I think there was this overwhelming understanding through the pandemic of the amount of just the amount of crap the people think it's raining at home. I feel like there's so much going on behind the scenes. And when you're seeing that through the screen with other people and lockdowns, with people trying to look after the children, at the same time, there was just like this really lovely kind of we realised that people have a home life now and maybe that understanding has gone some way to shifting that greedy jobs elements. I think that's what she was kind of getting at, that maybe this is an opportunity to reconsider how greedy we want our shops to be and who should be able to do them. 

Sascha: [00:16:25] Yeah, exactly. I mean, the great resignation was a trend for a reason. We were all just examining all aspects of our life. 

Jennifer: [00:16:32] That's true. I don't think. I mean, it's sort of a good thing in a way, because as much as we're being told that at the moment, people are working kind of record hours in Australia, we know that that's partly because of the cost of living. We know that's partly because there's a really tight jobs market people should be really considering. What should an ideal work life balance look like? How many hours should you be putting in to be able to survive and to put food on the table? How does productivity become a part of that? Because if we don't have growing levels of productivity, you have to work longer hours to pay for the same things. And so that's a national conversation that we should be having, man or woman, regardless of the workplace. And we're really struggling, I think, to have those sorts of high level discussions about how we want our lifestyles to look and the role that workplace and not just economic growth for the sake of economic growth. So there's a real opportunities here, and I'm really pleased that Claudia's kind of one Nobel Prize and allowed everyone to have that discussion again and brought it to the attention of so many people in Australia as well. 

Sascha: [00:17:27] I don't think there's a better note to finish on than that. Jennifer, thanks so much for joining me on the Dive today. 

Jennifer: [00:17:32] Thank you for having me. 

Sascha: [00:17:33] And we're going to leave it there for today. Thank you so much for joining me on The Dive. Of course, I'm going to ask you the same thing that I ask every episode. But why do I do it? It's because it works. Please jump into your podcast player. Give us a five star review. Right. Some lovely words. It really helps our little podcast get in front of your ears and oh my gosh, we want that to happen. A huge thank you to all of you who've already done that, but it makes all the difference. I'm going to be back in your feeds on Wednesday with a new story. Until then.