Lyla Lindsey
Australia's first official currency was the Australian pound, introduced in 1910. However, the story of Australian money begins much earlier, with the arrival of the first European settlers in 1788. For decades, the colony of New South Wales relied on barter and rum as a makeshift currency, alongside various foreign coins. The discovery of gold in 1851 led to the minting of Australia's first gold coins and the development of banking. Despite the introduction of the Australian pound, various foreign currencies continued to circulate in Australia until the transition to decimal currency, the Australian dollar, in 1966. Today, Australia's currency is known for its innovative use of polymer banknotes, first issued in 1988, which have since been adopted by several other countries.
| Characteristics | Values |
|---|---|
| First Australian banknotes | 1913 |
| First Australian gold coins | 1855 |
| First Australian decimal currency | 14 February 1966 |
| First Australian polymer banknotes | 1988 |
| First Australian currency | 1788 (Spanish dollars) |
| First Australian currency after Federation | 1910 (Australian pound) |
| Current official currency | Australian dollar |
| Current legal tender in Australia | AUD, also known as the dollar or Aussie dollar |
| Current legal tender outside Australia | Kiribati, Nauru, and Tuvalu |
| Current value of Australian currency in circulation | A$4.4 billion in coins and A$101.3 billion in notes (2023) |
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What You'll Learn
Australia's first gold coins
Prior to the introduction of gold coins, the Australian colonies primarily used a mix of foreign currencies, including British pounds, Indian rupees, and American dollars, which were often in short supply and not always accepted as a means of payment. The lack of a standardized currency was a significant issue, and the value of these foreign coins was often uncertain, making trade and economic transactions difficult.
To address this issue, the colonial governments of New South Wales, Victoria, and later the other colonies, began to consider the creation of their own coinage. In 1852, the Victorian Legislative Council appointed a committee to examine the possibility of introducing a local currency. This led to the Mint Act of 1853, which authorized the establishment of a branch of the Royal Mint in Melbourne and the production of Australia's first gold sovereigns and half-sovereigns. These coins were based on the British gold sovereign, which had been introduced in 1816 and was widely circulated and trusted.
The Melbourne Mint, which opened in 1854, began striking these new gold coins, which featured a design of St. George and the Dragon on the reverse, similar to the British sovereign, and a unique design of the Southern Cross constellation on the obverse, symbolizing Australia. The coins were minted using gold sourced from the local goldfields, ensuring their purity and value. These gold sovereigns quickly became a trusted and widely accepted form of currency, not just in Victoria but also in the other Australian colonies.
The success of Victoria's gold coinage led to the establishment of additional mints in Sydney and Perth, which also began producing gold sovereigns and half-sovereigns with their own unique designs. These coins played a crucial role in stabilizing the economy and facilitating trade during the gold rush era and beyond. They also served as a symbol of the colonies' growing sense of identity and independence, as they moved towards federation in the early 20th century.
Today, these early Australian gold coins are highly sought-after by collectors and investors, not just for their historical significance but also for their intrinsic value as precious metal bullion. They serve as a reminder of the pivotal role that gold played in Australia's economic development and the unique heritage of the country's currency system.
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The Australian pound
Before the Australian pound was introduced, the six colonies that comprised Australia had separate currencies, which closely replicated the British currency system. The first Australian banknotes were printed in 1913. For the first three years following the Australian Notes Act coming into force, some of the earlier private banknotes were overprinted by the Treasury as a temporary measure and circulated as Australian banknotes until new designs were ready.
In 1929, as an emergency measure during the Great Depression, Australia left the gold standard, resulting in a devaluation relative to sterling. A variety of pegs to sterling were applied until December 1931, when the government devalued the local unit by 20%, making one Australian pound equal to 16 shillings sterling and one pound sterling equal to 25 Australian shillings.
In 1949, when the United Kingdom devalued sterling against the US dollar, Australian Prime Minister and Treasurer Ben Chifley followed suit so the Australian pound would not become overvalued in sterling zone countries with which Australia did most of its external trade at the time.
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The Australian dollar
Before the Australian dollar was introduced, the Australian currency was the Australian pound, which was established in 1910, nine years after Federation. The Australian pound was divided into 20 shillings of 12 pence each, making the arithmetic of financial transactions unnecessarily difficult.
In February 1959, treasurer Harold Holt appointed a Decimal Currency Committee, chaired by Walter D. Scott, to examine the merits of decimalisation. The committee reported in August 1960 in favour of decimalisation and proposed that a new currency be introduced.
On 14 February 1966, Australians woke up to a new currency—the Australian dollar. The decision to change from the Australian pound to a decimal currency was a pragmatic, economic one. The conversion was also a major logistical and public relations triumph.
In 1983, Australia changed to a free-floating exchange rate. In December of that year, the Australian Labor government, led by Prime Minister Bob Hawke and Treasurer Paul Keating, floated the dollar, with the exchange rate reflecting the balance of payments as well as supply and demand on international money markets.
In 1988, Australia introduced polymer banknotes, coinciding with the country's bicentennial year. Polymer banknotes last significantly longer than paper notes, causing a decrease in environmental impact and a reduced cost of production and replacement. In 1996, Australia switched completely to polymer banknotes.
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The transition to decimal currency
The Australian pound was introduced in 1910, at par with the pound sterling. However, the Australian pound was divided into 20 shillings of 12 pence each, making the arithmetic of financial transactions unnecessarily difficult.
In 1937, a banking royal commission recommended that Australia adopt a system of decimal coinage based on the division of the Australian pound into 1000 parts. This recommendation was not accepted. In 1959, treasurer Harold Holt appointed a Decimal Currency Committee to examine the merits of decimalisation. The committee reported in favour of decimalisation and proposed that a new currency be introduced.
On 14 February 1966, Australia transitioned to a decimal currency, the Australian dollar. The conversion rate was two dollars to the pound. The decision to change from the Australian pound to the Australian dollar was a pragmatic one, and decimalisation became an opportunity for Australia to assert itself as a forward-thinking country.
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The invention of polymer banknotes
The Reserve Bank of Australia (RBA) and the Commonwealth Scientific and Industrial Research Organisation (CSIRO) took up the challenge, embarking on a 20-year "bank project" in 1968. The project aimed to create a new form of currency that would be virtually impossible to forge. During this period, Dr David Solomon, a young, award-winning polymer scientist from CSIRO, proposed the idea of using plastic for banknotes. This concept was inspired by a plastic business card he received from a visitor from Japan.
Solomon's idea marked a pivotal moment in the development of polymer banknotes. By February 1972, the collaboration between CSIRO and the RBA had progressed, and they agreed to initiate a project focused on creating polymer banknotes with advanced security features. The CSIRO team swiftly developed a "proof of concept" and presented it to the RBA. This concept included innovative security measures, such as a diffraction grating, an optical component that splits and diffracts light into multiple beams, enhancing the security of the banknote.
The first polymer banknote was issued in Australia between 1988 and 1996, specifically as a $10 bicentennial commemorative banknote. This marked a significant milestone, as Australia became the first country in the world to adopt polymer banknotes, showcasing their commitment to innovation and security in currency. The new polymer banknotes offered enhanced durability, colourful designs, and advanced security features, making them a trusted and celebrated form of currency in Australia and beyond.
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Frequently asked questions
The first Australian currency was invented in 1910, nine years after Federation. It was called the Australian pound and was divided into 20 shillings of 12 pence each.
The first Australian banknote was printed in May 1913. It was a ten shillings denomination.
Australia switched to the Australian dollar on 14 February 1966.
