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ELIZABETH:

From Schwartz Media, I’m Elizabeth Kulas, this is 7am

New legislation will restrict the way Australians use cash. But there are concerns the laws could jail people for using legal tender. Karen Middleton on the future of money.

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Archival tape -- CORY BERNADI:

“It’s outrageous. This is the start of a war on privacy, it’s a war on currency.”

Archival tape -- JOHN ADAMS:

“I have to categorise this, on many cases as the greatest attack on economic freedom and liberty in this country in the last 2 or 3 decades. I mean, this law is quite serious.”

ELIZABETH:

Karen, you’ve been covering the government push to change the way that we use cash. What’s this story about?

KAREN:

Well it's about a government proposal to crack down on cash transactions of $10,000 or more. The government argues that it's concerned about activity in the black economy, that's legal activity that is not being declared to the Tax Office and illegal activity like drug trafficking and the like.

ELIZABETH:

Karen Middleton is The Saturday Paper's chief political correspondent.

KAREN:

They're saying if they introduce this criminal offence of paying in cash, that it will help to combat those kinds of things.

ELIZABETH:

But the sentences that are being proposed around this legislation, they are pretty hefty.

KAREN:

Yes. So it would make this a criminal offence. And there are penalties such as a $25,000 fine or two years in prison. So it's no small thing to commit this kind of offence and find yourself prosecuted for it in future.

ELIZABETH:

But there are some exemptions here...

KAREN:

Yes and it's a bit complicated here because they're saying that they're really only trying to tackle commercial transactions and that if you are private individuals engaging in some kind of transaction where somebody is selling something and somebody is buying something, that it isn't going to affect you.

So let's take the example of a used car. If you're buying a used car from a used car salesperson as a commercial enterprise then you won't be able to pay $10,000 or more in cash in future and it will be an offence for both the buyer and the seller.

The government says it's not supposed to tackle individuals, but there are provisions where you're going to have to check the status of the other person in the transaction as well as your own status to make sure that they're not selling a car as part of any enterprise, to make sure that both you and that other person are not committing an offence, and that's where some people are saying it's getting quite complicated and that there is a risk if you don't do the checking adequately that you can find yourself inadvertently caught by the law.

ELIZABETH:

Are you saying that technically if I bought a car on Gumtree for $10,000 dollars in cash, I could be committing a crime?

KAREN:

That’s right. If they're a business and they're selling it to you, you could both be committing a crime.

ELIZABETH:

Even though, you know, you obviously bought that car with legal tender.

KAREN:

That's right. And that's where some of the criticisms are coming in about the whole concept here, that cash is legal tender. We're not saying it's illegal to buy anything in cash. It will still be perfectly legal to pay cash for things, you're just not going to be able to pay ten thousand dollars or more at once or in instalments. And that means if you're buying a car or making another large purchase and you're paying in instalments, if those instalments add up to ten thousand dollars or more in cash, even if they're combined with checks or electronic transfers or whatever, if the cash component adds up to ten thousand dollars or more, then you could potentially fall under this legislation.

ELIZABETH:

And then there's also this related element which is around paying wages in cash?

KAREN:

Well it's separate from this legislation but the government is in fact pressing ahead with another proposal that came out of an examination of the black economy. It set up a black economy task force to have a look at all of these issues and that came back into 2017 and recommended both this crackdown on cash transactions, and in a related matter I guess, that people shouldn't be paid in cash at all.

Now most people are paid electronically, but there are some circumstances where people are paid in cash. If you think of backpackers, for example, doing fruit picking or enterprises where there are casual workers or seasonal workers, sometimes those people are paid in cash. Well that, if the government proceeds with this other measure, it would be illegal.

ELIZABETH:

So do you think this is the end of cash?

KAREN:

No I don't think it's the end of cash. But I do think it signals the Government is quite serious about discouraging people from using cash. We're very much heading to being a cashless economy anyway. But where that gets tricky, I suppose, is for the people who are still relying on cash. There are lots of particular groups that are still using cash, even though they're in a minority, and how these kinds of changes are going to affect those kinds of people in the long run.

ELIZABETH:

And what about hoarding currency, does this have anything to do with that?

KAREN:

Yeah, that's an interesting sort of byproduct issue, I suppose, of all of this. If you look at the research that the Reserve Bank has done, they will tell you that most of use cash notes that are smaller denominations – fives, tens, twenties and fifties – although less frequently fifties.

We don't like using 100 dollar notes very often. But what you'll find if you look at what's in circulation, the currency issued by the Reserve Bank, the vast proportion of notes in circulation a hundred dollar and fifty dollar notes. So where are they going? Well it seems that they're either being used in the black economy in undeclared activity, or they might be being used in legal activity in casinos and the like.

But people are also hoarding them, keeping them at home as a sort of cash stash for future use. People are stuffing the cash under the mattress, or the equivalent. And it's interesting, and it means that there are lots of 100 dollar notes out in circulation officially but we're not really using them very much in day to day transactions.

ELIZABETH:

So do we know what proportion of banknotes in circulation are being used in daily transactions?

KAREN:

It's only about 25 per cent that are being used in daily transactions which is, you know, really a small proportion. And so that just does tell you, there is still a bit of an attitude of hanging onto cash, even if people are not using cash in their daily lives. They still think that it's worth hanging onto it as some kind of personal investment for the future.

ELIZABETH:

So the other 75 percent of notes are largely, we can assume, being held by people in a longer term way?

KAREN:

Yes. Either people who are perfectly ordinary people who are holding small amounts or large amounts for their own reasons, or they might be people engaged in criminal activity that are keeping cash because cash is harder to trace.

The other thing that's interesting is that some economists are a bit suspicious about this move and suggesting that, aside from just dealing with criminal activity and the black economy, tax evasion, this might also be a move in terms of restricting large amounts of cash in trying to pre-empt a downturn in the economy, because when the economy slows as we're seeing at the moment, and interest rates get very low and potentially even into negative territory, putting your money in a bank becomes even less attractive. If we were to go, for example, to negative interest rates, that means we're no longer putting money in the bank and having the bank pay us for the fact that it gets to use our money until we need it in the form of interest. But we would effectively be paying the banks to look after our money.

So there's even greater chance that they might pull it out. And that, of course, causes problems for the government in terms of tracing transactions but it also could potentially run on the banks. Now that's a very dramatic and extreme example, but that's what some are suggesting could be behind this as well. And this would be a way of discouraging people from thinking, well, I can just use large wads of cash in transactions in future.

ELIZABETH:

We’ll be right back.

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ELIZABETH:

So Karen, we're talking about government legislation to limit large cash transactions. Who is pushing for these changes?

KAREN:

Well, business is very supportive of the idea of these kinds of changes. The government is really the prime mover here.

Archival tape -- Michael Sukkar:

“The cash payment limit not only targets those avoiding tax, but more importantly, and more crucially, it helps to fight organised crime syndicates.”

KAREN:

The Assistant Treasurer Michael Sukkar has carriage of this legislation and introduced the legislation into Parliament in late September...

Archival tape --Michael Sukkar:

“We know that large amounts of cash is essential to the businesses of modern criminal rings. The cash limit will make it harder for them to do so.”

KAREN:

...and they're hoping to get it through by next year.

ELIZABETH:

So who's raising concerns about the legislation?

KAREN:

One organisation that we do know that's raised some questions is the Certified Practising Accountants – CPA Australia – and they are really concerned about the shape of this legislation. They've raised concerns about the fact that, as we've talked about, people could be jailed for using legal tender. And they're worried that this legislation effectively contradicts, a little, the presumption of innocence by the way that it puts an impost on people to check each other's status.

There are also provisions in here that could make other individuals in an enterprise responsible for the actions of one person, so it spreads the liability around and CPA Australia is concerned about the legal ramifications of making people responsible for the actions of others when they've had absolutely no role in them. And so they're saying that this legislation should preferably be scrapped, or at the very least overhauled and some changes made.

ELIZABETH:

And what about objections within the government itself?

KAREN:

Well this is interesting, there have been a handful of Coalition MPs who've made quite strenuous objections to this. Most of the coalition has waved it through, it went through the Coalition party room when Parliament last sat in September. But the Nationals that objected were Pat Carnahan, Barnaby Joyce, and George Christensen, and Liberal Russell Broadbent also raised concerns.

I spoke to Pat Carnahan about that, and he was saying that he's concerned it is turning mums and dads into criminals, effectively. And that it will be the end of bargaining using cash to get a discount. He said that he fears that the people that will be most captured are, you know, the little old lady who decides she wants to renovate her kitchen and instead of paying 15 thousand dollars, can pay twelve thousand dollars and get a discount for cash and that this will then, in future, be a criminal offence. Russell Broadbent equally told me that he's got similar concerns, and both of them have said that their constituents have raised it. In fact, Pat Carnahan said it's made people very angry in his electorate of Cowper in regional New South Wales.

ELIZABETH:

And then presumably there are supporters. Who is pro seeing this legislation go through?

KAREN:

Peter Strong, who works for the Council of Small Business Associations of Australia, says that it's a good idea and that this should happen. And he says that business is often under pressure from people that they're transacting with to do business in cash and this would make it easier for a business to resist that.

He was a member of the black economy taskforce and is now on the black economy board, as it's called, which the government has set up to deal with these kinds of issues going forward.

He says where he's concerned the government hasn't addressed one element of the problem is that if a business is put in that position, for example, a small business in the trades, may be in construction or something, where somebody is offering cash and refusing to pay any other way. The business is left with no option but to take the cash and then be forced to be committing a criminal offence. He says he thinks there should be an arrangement where a business put in that position could take the cash and then report it, declare the cash as income and report the transaction and not be themselves liable for a criminal offence.

ELIZABETH:

And so what happens now, Karen, what can we expect next?

KAREN:

The legislation is in the Parliament. The bill has been sent off to a Senate committee to have a look at. Interestingly, though, their deadline for reporting is not until early February of next year and the legislation is supposed to take effect on the 1st of January.

So I suspect we're going to see that timeline pushed out yet again as the Senate deals with this issue and whether they can fix that up to make it a more effective law to do what they want it to do without catching people by accident and making criminals out of ordinary folks just buying and selling on Gumtree.

ELIZABETH:

And Labor's position on this?

KAREN:

Labor's inclined to support it, which suggests that it will probably go through. There is a bit of opposition from the crossbench in the Senate and particularly from One Nation. But if the government was to get Labor's support, then it would certainly pass.

ELIZABETH:

There hasn't been a lot of attention on this story. Is it the sort of thing you think that happens and then the public tends to notice only later, only after it's gone through?

KAREN:

Yeah I think there's a bit of that. It has been written about a little bit but it's been sort of going along under the radar, I guess, because these Treasury consultations have been happening in the background and sometimes when the big political parties agree on something, you find it's legislated before other people know what the impact of it is and then we discover the impact when suddenly there's a change in the law that affects us starting from, you know, January next year.

ELIZABETH:

Karen thank you so much.

KAREN:

Thanks Elizabeth.

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ELIZABETH:

Elsewhere in the news:

Home Affairs Minister Peter Dutton has, for the first time, used his powers under the medevac laws to block the transfer of a refugee on security grounds. It was recommended that the Iranian man in question be transferred to accompany his daughter who required treatment in Australia. In a statement tabled in parliament, Dutton said he refused the transfer because he reasonably believed the individual would quote: “expose the Australian community to a serious risk of criminal conduct.”

And Scott Morrison has declared that his budget surplus will not be “spooked” by the IMF’s decision to slash Australia’s economic growth forecasts from 2.1 to 1.7 per cent -- below both the Treasury and RBA outlooks. Morrison has blamed the downgrading on the, quote: “uncertainty of the times in which we live.”

This is 7am, I’m Elizabeth Kulas. See you Friday.