Households hoarded an extra $800 million in cash during Covid lockdown

Households hoarded $800 million of banknotes in the weeks leading up to the March Covid-19 lockdown.

“During the weeks leading up to the March 25 pandemic lockdown, New Zealanders demanded an unprecedented amount of cash, with $800m of bank notes issued in March alone,” said Christian Hawkesby, Reserve Bank assistant governor, general manager, economics, financial markets and banking group.

“These bank notes have not yet returned to the banking system, meaning they are likely still being held by the public,” said Hawkesby, speaking at the Royal Numismatic Society’ annual conference in Wellington.

During the lockdown it became clear cash hoarding was happening, but Hawkesby confirmed it continued.

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“Since then, cash in circulation has continued to increase, growing by about 15 per cent year-on-year during the second quarter of 2020.”

This was a mirror to other countries, which had seen demand for cash continue to grow.

“Many other countries have also experienced increased demand for bank notes during the pandemic, as a store of value and a back-up method of payment,” he said.

“It is not unusual for cash holdings to increase during periods of uncertainty.

“In the lead up to the year 2000 wide-spread uncertainty of potential computing failures (the so-called ‘Y2K bug’) resulted in a sharp increase in cash in circulation,” he said.

“Similarly, economic uncertainty during the financial crisis over 2008 – 2009 resulted in a rise in cash in circulation.

The amount of cash in cicrulation is up 15 per cent year-on-year, says Christian Hawkesby, left.

Hagen Hopkins/Getty Images

The amount of cash in cicrulation is up 15 per cent year-on-year, says Christian Hawkesby, left.

“Smaller increases in cash holdings can also be seen with regional events such as the 2011 Canterbury earthquakes,” he said.

Despite predictions of society becoming cashless, and despite people using cash for fewer transactions, ,cash in circulation continued to increase.

“This is likely due to its usefulness to some as a store of value,” Hawkesby said.

The Reserve Bank has said the future is not cashless, but less cash, and that its research had shown people wished cash to remain, and saw it as a human right.

But, it had become clear that the cash system as it stood would not be sustainable in a world where cash was used less and less, he said.


Murupara townsfolk had feared they’d be left with no ATM after a log loader was used to steal the only money machine the town had.

The Reserve Bank was doing a review of the cash system, with the objective of ensuring that the physical and business arrangements for cash distribution were efficient, resilient, lower carbon and set up to meet the public’s needs now and into the future, Hawkesby said.

“One option to ensure that cash is available for the long-term might be concentrating cash services in a single provider. For example, the end-to-end cash infrastructure could be provided by an industry monopoly model,” he said.

“Alternatively, a private-public-partnership as seen in some parts of the water, transport and electricity industries could be used.”

But he said: “Covid-19 has also highlighted the important role that cash plays in times of economic uncertainty,” he said.

But cash was getting harder to get hold of, he said, and banks were making it harder for people.

“Some debit and credit card schemes generate profitable returns for commercial banks and might present a more favourable service offering for banks compared to cash services,” he said.

Since September 2019, the largest four commercial banks had collectively reduced their number of bank branches by 6 per cent and reduced the operating days or hours of 271 remaining branches, Hawkesby said.

“Reduced access to cash has been particularly felt by regional New Zealand as bank-owned ATMs and branches have become more concentrated in urban centres and cash services have been pulled out of regional areas, he said.

“This is particularly evident in rural communities on the West Coast of the South Island where there is only one bank ATM located between Wanaka and Hokitika – a distance of 418km. These rural communities are now more likely to be serviced by independent cash providers which charge fees and are generally located inside retailer premises (with limited hours).

“Moreover, unreliable internet, fees for card transactions, and occasional isolation due to natural disasters can create additional barriers to these communities ability to transact.

“On the East Cape of the North Island, communities are also facing challenges. Reduced cash services and low internet coverage make it difficult for people living in these remote areas to make and receive either cash or electronic payments, or to give koha,” Hawkesby said.

Beautiful, but distant, and when it comes to cash, the East Cape is now poorly served by banks.

Tom Lee/Stuff

Beautiful, but distant, and when it comes to cash, the East Cape is now poorly served by banks.

“Professional cash transport services can be prohibitively priced for businesses in these remote areas. As a result, some small businesses have to travel lengthy distances to the nearest town with a bank branch or street facing ATM to deposit their cash takings or acquire change.”

And, he said: “Cross-border payments are also becoming more difficult for some. Many people sending money to and from the Pacific islands tend to rely on cash to initiate and complete their remittance transactions. However, fewer commercial banks are willing to provide cash and banking services to businesses that transfer money to and within the Pacific.”

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