The Death of Cash

Jason · 00:00Welcome to episode 153 of The Numbers Game. I'm Jase, and as always, I'm joined with the lovely Marty and the fantastic Nick. How are we going, fellas?

Marty · 00:09Fantastic for Nick. Lovely, mate. That's interesting. There you go. Jase. No, I'm good, mate. I'm, uh, in between all the summer sports ending and footy not yet starting, so in a bit of an abyss here trying to work out who I am and what I need to do with myself.

Marty · 00:28So, uh, but feeling good. Work's back flowing. Happy days. Nick, how are you going? Yeah,

Nick · 00:33good. Good, good. Just enjoying a lot of sport too, Marty. It seems like everything's happening at the moment. There's test matches, there's, there's, uh, big American, uh, events coming up. Super Bowl, there's, uh, a, um, AFL ads are starting to pop up again.

Nick · 00:49Rugby league ads are starting to pop up again. So it's just sport. Sport everywhere, it's good. Golf's back, as in, you know, golf on TV, so. Yeah, it's all, it's all happening sport wise. And I

Nick · 01:00see you're right back into cricket, Marty, which is good. Seen you down there just limbering up again. I hear there might be a return to the Supers, or

Marty · 01:08Ah, the veterans, Lego.

Marty · 01:09I'm not sure how that falls. I'm not sure how this fake hip's going to go, but, uh, Charlie's got into it, which is great. So I've been down the nets every night and, uh, coaching him. And, uh, it's good to be able to share the joy of, uh, something you like that he's doing and really taken to, but now we're into, we're coming into footy season soon.

Marty · 01:27So that'll be gone. So I have to find something else. Just one quick

Nick · 01:30question. What? How many balls you let him bowl before you put it back over his head, just to remind him that, you know. Well,

Marty · 01:36I've, I've got this real aggressive streak when I bat, where I want to absolutely pummel and put him over the fence, right?

Marty · 01:45But then I have this, there's this side of me. As a dad, then I go, I'm probably going to hit the side of the net. It's going to ricochet straight into his head. So I, I've had to hold back my natural instinctive, uh, having a crack. So,

Marty · 02:00but, uh, he's alive and well, everyone. So it's all good. Jase, how are you going?

Marty · 02:04What are you into?

Jason · 02:05Uh, I was just having a laugh cause, you know, it's funny the timing of when we have these conversations and, you know, we, we, we love our sport. It's why the numbers game is called the numbers game. Cause we, we love sport. We love numbers. And I actually had a orthodontist appointment this morning and, you know, just sorting out the aligner and the teeth and all this stuff.

Jason · 02:22And, you know, you lie back and it's one of those fancier places where they've got teeth. TBs everywhere. They've got TBs everywhere. But it was, there was a lot of sport going on. I was like, this is great. If I'm going to have someone's fingers in my mouth, sorting out my teeth, I might as well be enjoying the sport.

Jason · 02:37And even the, the orthodontist was like, ah, geez, we're in this weird time where, you know, footy season hasn't started yet, but there's lots of different things going on. And even she was getting into the sport. So I'm like, you know, Sport is a brilliant thing. It brings people together. Um, love hearing Marty talk about his cricket and everything else going on.

Jason · 02:54And mate, just, I'm into everything. Basketball's going great. The NFL is awesome.

Jason · 03:00But it's the Bombers year, Marty. We've, you know, it's big prediction. The Bombers are going to win their first final in seven and a half thousand days or something. And mate, 2024 rolls on and we're having a bloody good

Marty · 03:09time.

Marty · 03:10Ah, it's a good time. Sport's great. I'm not sure about having people's fingers in my mouth though. You're still, you're still doing that, mate. It's obviously working for you, .

Jason · 03:19Oh yeah. 1, 1, 1 1 year down. One year to go. If you've been, if you've been with the numbers game for the whole journey. Uh, I've had a year of Invisalign.

Jason · 03:28I've got a year to go, and Casey still teases me that it's become my personality that, that I am my aligner. It's part of my personality and my identity. She's probably right. Um, but here we are, so. In nature or in, you know, getting this back on track and, and getting the numbers game to continue rolling before we get cut from the podcast air and Spotify removes us and Apple removes us.

Jason · 03:51Let's get back on track. What do you have for us today, Nick?

Nick · 03:55Uh, so I follow a, uh, an economist. His name is Steven Kukulis.

Nick · 04:00Um, I find he's very. Well, he's very good. He simplifies things and he, he, he's generally got a pretty positive view on things and, uh, dare I say, a no bullshit view on things. So if anyone wants to, to, to follow an economist that's, that's, um, that's actually enjoyable to listen to, Stephen Koukoulas.

Nick · 04:25Uh, he's often on Mark Burris podcast, um, so Mark Burris has him on there, um, quite a lot, but where I'm going with this is, I read an article, um, that he wrote or was definitely interviewed in, um, and how the death of cash driving, is driving interest rate rises is what it was. What it was titled. So obviously, you know, inflation, uh, being a big thing at the moment, and that's obviously driven interest rate rises and we need to get inflation down.

Nick · 04:54And when we do that interest rates come back. So how is the death of

Nick · 05:00cash, um, actually having an impact on those numbers? And I've, I've never actually thought about this. So just, just a pretty interesting stat, um, a cashless society is becoming a reality. The number of Australians using physical currency has gone from 70%, um, to just 10%.

Nick · 05:21And. It was 70 percent in 2007. So I think back to 2007, I think, well, that's not long ago. I still had an ATM card and a credit card and I was tapping and going. Um, but you know, in the space of just, well, what is that? Um, not even 10 years, 20 years, 17 years, uh, we've reduced our, our use of cash by 60%, which is crazy.

Nick · 05:45So the article then talks about, well, how is that, how is that actually driving inflation? And it's pretty obvious when you think about it, but when people are using cash, so why did people use not just cash to pay,

Nick · 06:00but, you know, people would pay staff with cash. So you might have a tradie come around and that tradie will say, you know, we can cut the GST.

Nick · 06:08So instead of, you know, 220 bucks, I'll do it for 200. Um, not just that, but I cut the GST and I cut my tax rates. So I'll actually do it for 180. Uh, you had employers that were paying staff cash. Um, why would they do that? To reduce payroll tax, um, to reduce super. Mind you, I'm not saying any of this is right.

Nick · 06:28Um, so it's a benefit for the employer. It's also a benefit for the employee because they're not paying tax on that cash. So all these, there's all these win wins when you pay cash. Um, and then you think about it, it's like a snowball effect. So. You know, Jase, I work for you. You would never do this because you're a registered, registered tax agent.

Nick · 06:45But you pay me, you know, 800 bucks for my week of work. Uh, I then go to Marty's, um, milk bar, um, down there in Humble, Pascovale, where he grew up. And I pay him, you know, five bucks for a loaf of bread. And

Nick · 07:00he says, well, I'm not declaring that because I've got cash. If I declare that, I've got to pay tax on it.

Nick · 07:05So then Marty takes that five bucks and he does what he does with it. He goes and buys a coffee with it. The cafeteria goes, well, I'm not, I'm not disclosing that. So it's just this, this chain, this snowball effect of things not getting, we're getting recorded. So what you've got now is this tap and go. So everything is recorded.

Nick · 07:24So I guess where he was going with this is when you look at the data now and how they're generating data, there's far more transactions, um, that would be recorded in 2024. Um, then there would have been in 2007 and then prior to 2007, which is the date he's talking about. Um, so he, he referred to it as the black economy, um, which is, you know, where we're all using cash and these things are not getting recorded.

Nick · 07:51And I, and I think, I think when you, you, you listen to businesses that say, well, we don't, you know, we're not really going that well, or we don't feel like we're

Nick · 08:00going that well, but the data that's being reported is that business is flying. There's just different, different levels of reporting happening.

Nick · 08:08So we might not be getting the right read on what's actually happening in the economy and what's actually, actually happening, uh, happening with inflation, uh, compared to say 2007. So what, you know, when you really think about it, 2007 was probably incorrect, right? Because there was a lot of stuff that wasn't recorded, but now it is recorded.

Nick · 08:29So it's just a different method or access to more data, which is making 2024 look a lot better than maybe 2007. Where it's not giving the right read. Um, so I found it, there's no right or wrong and you can't really fix it. At the end of the day, everything should be recorded, whether it was cache or not.

Nick · 08:48Um, but yeah, I found it was a really interesting take on it. And I hadn't really thought about the fact that, you know, things wouldn't have been. Recorded back then, a lot of transactions were not

Nick · 09:00recorded, income not recorded. People, you know, the other thing is the unemployment rates and how much people are earning, well, if you're earning cash, that's not on, it's not recorded.

Nick · 09:08So the ATO doesn't know about it. So. Um, Jason, my pass to you, obviously you're in this, you're in this game, um, so your thoughts on that?

Jason · 09:17Uh, wow. Yeah. Look, it's, it's an ever changing landscape and I do think back to 10 years ago, the conversations that I was having with clients when I started my career and then even, you know, I worked.

Jason · 09:31I had a business that had some cash and then I was paid in cash and, you know, while I wasn't getting super as a young, young guy, I was like, you beauty, like every dollar I earned is in my pocket. I could go to the nightclub on the weekend and buy the Red Bull and vodkas and put the cash, pay cash to put petrol in the car.

Jason · 09:49And then the whole way along, there was no income tax being paid. There was no super in the super fund. Um, yeah. But, you know, there was no transaction fees getting gobbled up on that money

Jason · 10:00either. Um, the business, you know, all those different elements and layers, um, then from a, you know, now then moving more towards my accounting life, talking to clients, you know, those conversations five or 10 years ago, there was many, many more conversations where.

Jason · 10:16We, our, our job from an ethical and moral point of view is to guide our clients to get that money back in the business environment, pay the appropriate GST and pay the tax on it. Now, sometimes it's quite hard. It's like pulling teeth, uh, you know, another teeth reference. That's for you, Marty. Um, you know, but you know, so they go, Oh, no, it's all good.

Jason · 10:35You know, the concreter came around and he wants cash as well. So rather than me putting that cash in the business, I'll just give the cash to the concreter, or I'm going to chuck a pool in the backyard. I'll pay cash for the pool. I need to get some, you know, whatever it was. So what was that doing? There was this black economy of the cash going from one business to the next to the next to pay for things that were more generally acceptable for cash.

Jason · 10:54And you use the exact example, Marty, you know, the common everyday Australian knew

Jason · 11:00to ask the trainee, can we take 10 percent off the bill if I paid cash or take 20 percent off my pay cash? Now, 10 years on, if, if the cash circulation is down 60%, 70%, that's not, that's not happening anymore. And our clients have even said that to us too.

Jason · 11:15They're like, I'm sure I'm gonna make ends meet. Because everybody now is paying, you know, through the business. I'm paying more tax than I've ever paid before in my life. I'm paying more GST than ever. And as the business owner, they've got not as much left over as before. So you're right, from an inflation point of view as well, and you know, cash driving interest rates.

Jason · 11:38What that also means then, is if we've got more money going through the business, More taxes being paid, more GST being paid that way, and more transactions being recorded. You're right. All of a sudden the government has this data they've never had before on how much money people are spending. Because in the past, the ACO didn't know about the All the driveways, new

Jason · 12:00exposed aggregate concrete driveways that were getting laid, the new pools in the backyard, the new decks and pergolas going up.

Jason · 12:07You know, they're just, you know, the common examples of, you know, stuff happening at people's houses at the moment. But now that the ATO and the government know about all of this It's driving up inflation because it's just, you know, the more people are spending, the more it drives up inflation because the prices then go up, people aren't getting it for the less 10%, less 20 percent price anymore.

Jason · 12:28They're paying the full whack. And then now because businesses are realizing they're not making as much money when it's not cash, they're then putting their prices up as well. Yeah. So it's this compound effect that is absolutely just, I think it's crippling a lot of the economy that it hasn't been fast enough to catch on to the price changes that they've needed to implement to still make as much money with all of these fees and transactions and I mean, I saw an example, I'm not going to be able to nail it exactly, but, and it was, you know, it

Jason · 13:00was on social media, one of these memes or pictures that went around, and it was like a cafe had shared in their window why they preferred if you paid cash, and it wasn't so much about avoiding paying taxes and GST and whatnot, but it was every time a 50 note passes through, let's say they did a 50, you know, smashed avo and a couple of coffees and a few juices, but if you pay on card, It's The merchant facility might take 2 percent of that, and all of a sudden you've only got, you know, 49.

Jason · 13:30Then that cafe buys its supplies and uses that 49, pays on merchant facility, loses another 2%. By the time you'd use that 50 ten times, you were down to 40 or whatever dollars left over. Now, If you, if you were paying cash the entire time and the bank wasn't taking their merchant fees, you've still got a $50 note.

Jason · 13:54Somebody who's an end user after all those transactions have happened, has a $50 note now with all of

Jason · 14:00the merchant fees, card transaction costs and everything else going on, the banks are cashing in on people not using cash anymore. And that's one of the biggest things that we probably don't. Pay attention to with all of our tap and going the whole time because we've built this habit and routine of how easy it is to not carry cash and just tap our phones or tap our cards.

Jason · 14:21Ultimately, at the end of the day, all we're doing is throwing more money into the bank's pockets and less money for the end user being the business owner or ourselves.

Marty · 14:29It's so true, like, yeah, I come out of the cash generation in the 80s when we had the milk bar and, um, yeah, it's fascinating, like, I always remember even Dad, at the time, he was buying cigarettes in Victoria wholesale to resell to people.

Marty · 14:44And then the government issued a tax on cigarettes. So he'd go and then buy them from New South Wales from cash. So he could avoid, you know, avoid that. Cause he goes, that's coming out of our, our family living, you know, really at the end of the day, but the

Marty · 15:00other thing that. That I remember was this transition to card with merchant facilities on top of it.

Marty · 15:07And you would make a selection to pay for cash because you didn't want to pay that extra 2%. You would actually make that as a conscious decision. But. Now, it's just, you just do it, because that's 90 percent of people doing it, right? So it's like, you forget about it, but that's where the banks and, you know, all those merchants make their money is on the transaction.

Marty · 15:29It's always the people, it's not the people looking for gold, it's the people that make the pots and pans that, uh, come out wealthy at the end of the day, and, and it's, it's a good reminder going through. Those generations. It just means we can't compare 2007 to 2023. We have to compare year on year, um, also be more immediate with the times because it's just, it's a totally different economy.

Nick · 15:53It's, it's, it's interesting. And, um, I've, I've, I've had some cash on me for,

Nick · 16:00um, for a week or two because of a golf thing, but I've noticed I've been playing, I've been paying my, uh, the guy I get a coffee from around the corner from home. Um, Just with 5 notes, um, and my coffee's usually 6. And he goes, and I'll bring the cash out, I've done this the last 3 days, and he says just give me 5.

Nick · 16:23So, straight away I'm saving a dollar off every, and that's a lot when you're only paying 6. So I'm saving a dollar off every coffee just by giving him cash. So I'm starting to think, I'm just gonna hand him five bucks every day instead of paying six. Yeah, you're

Jason · 16:37getting a free coffee a

Nick · 16:38week. Basically, you know, so straight away he's telling me without telling me, Hey, keep giving me cash.

Nick · 16:44Um, and I'm thinking, well, if I save, you know, seven bucks a week, if I buy one every day. 7 a week at 50 is what? 250 that right? Something like that. So that's just for the coffee. So where else can you

Nick · 17:00save money? The,

Marty · 17:01the other thing I'll throw up there is, and I'll put it back on you guys to tell me how you think about this, but when you got cash as an income and you paid out cash, you knew exactly, it was almost like a semi budget because it would be physical, it'll be a physical removal of the money you had made.

Marty · 17:21So you would know you are much more careful with that money as, as nowadays with the tap and spend, unless you're really strategic on your budgeting, you could just outlay cash without, it's like going through a bucket with holes in it. It's like amazing. So I don't know how you, how you think about it, but with cash, it was very, very strategic.

Marty · 17:41You knew what you had, you knew what you were paying and you knew when you were low in real. From, from

Jason · 17:47a budget control point of view, that's actually, you know, one of those, uh, the old tricks of whatever you, you can afford to spend that week. If you've got, you know, if your spending for the week is 150, if you withdrew it out and sat there and looked at it

Jason · 18:00physically and, and spent that on your lunch and your coffees every day, and you get to the end of the week and you got 20 bucks left over, you've controlled your budget.

Jason · 18:07Now, if it's all physical, if it's all sorry. digital in digital land and you're tapping your card every day and you can't see that you've actually spent 170 instead of 150, you've blown your budget that week. But it's not as physical and in your face as if it was cash in your wallet. Because once you run out, you've had to then have that realization that you've run out of money from a budget control point of view.

Jason · 18:29And the last couple, like, you know, as I said in a previous ep, I spent the month of January in Bali. Now, they're a big cash economy. They love using cash, everything's cash, and I would withdraw and have the money that I was going to spend for that trip in my wallet. Now, I actually had to carry a separate bag around because it's stuck like that big with their, you know, repair.

Jason · 18:52But it was actually like real, a real reminder that having physical cash and handing it over made me think more about my

Jason · 19:00purchases than when I was tapping a card and not seeing how much I was spending. Then also what they've, I think what they do much better than we and a lot of businesses here do is if you pay by card, they stand there and show you the difference in price.

Jason · 19:14So we're at a restaurant and it might've been the equivalent of 94 to pay cash. And then if I pulled out my card and they said, sorry, sir, see the price below. There's two options on your bill. If you pay by card, we add on all the merchant fees and a charge. It might be 97. And I was like, Oh, well, actually I had the cash on me.

Jason · 19:34So I was like, Oh, cool. Actually, I'll just pay cash. Here you go. Sweet. Save 3, 3 is 3 is what it is. But, but it's more that. Getting it back in your head of what it's costing you every time you tap the card. If, if the business you're going to is adding the merchant fees back to you and every day you pay merchant fees that you don't have to, if you'd just gone and withdrawn cash at the start of the week, different mentality that we just don't have anymore.

Jason · 19:57Um, I don't feel like in this day and age. And think

Marty · 19:59about,

Marty · 20:00think about behavior. Like when we utilize cash, we've got paid cash and spent on cash. A credit card was a separate thing. Whereas now it's all digital. So we're in the game. So we know the difference between credit and, you know, funds we have, but if you get someone in the habit of spending digitally.

Marty · 20:19How do they correctly distinguish the difference between credit card spend to actual cash spend? There's the, it's more clouded because you're just going to do the spend because the money's available. You know, so now I'm being pretty, people should know, but when it, when it was cash and there was a card, credit card, and it was separate, no FBOS, then you would make that distinctive choice.

Marty · 20:42And it, I just, again, it was almost a forced discipline in it again. Whereas I think now people will just make the purchase, you know, without thinking about that until later. And you see a lot more, it's funny when there's tougher economic times, there are always

Marty · 21:00people that budget with lists. When they go shopping, they go, I need this, need that, need this.

Marty · 21:05And then you say, there's other people that go, I've got an hour. And they'll go in and you see these, these half filled trolleys just left alone in the supermarket because people have come to their senses on the back end going, shivers, I can't afford this. And it's, you're seeing that a lot more, um, in this type of climate as well.

Marty · 21:24So, I don't know what the answer is to, you know, other than people being really diligent on their spending and seeing what's going on, but there definitely was a, A set premise that worked with cash. Um, but it is a different, yeah, time moves on and you've got to adapt. So I just don't think you can compare those two different generations actually.

Nick · 21:45Yeah. And you guys probably heard me talk about this and we lead with this, um, on our, when we do our financial wellbeing presentations, but. Yeah, the reverse engineering of the budget because you haven't got that money in your pocket going backwards,

Nick · 22:00um, but putting money in an account at the start of the week, which is yours to spend and only having that linked to your card or your phone.

Nick · 22:07So, you know, when you actually do run out of money on that, from that account, because that was your weekly spending. Uh, that's, that's another way to do it, I guess. Um,

Marty · 22:16yeah, that's how we do it in the family. We allocate an amount per week and the rest gets filtered off into other investments or it's a good way to do it.

Marty · 22:26Yeah.

Nick · 22:26Yeah. But just, um, I guess to wrap this up, it's going back to the original, um, issue is the issue that this is having on government and having. Be correct data to make, um, to come up with economic policy, you know, which is, um, economic policies, making decisions on whether a non interest rate should go up or not.

Nick · 22:49Um, so I'm just going to read what Steve said here, because it's, it's, um, it's a good summary of why this is creating an issue. Um, it's a critical issue for policy makers as they analyze the

Nick · 23:00economy relative to how they interpret it, uh, interpreted data a decade ago. So when looking at a time series of data, it means the economy now is weaker relative to the growth being recorded by the ABS.

Nick · 23:12This is why there is pain in business surveys, yet the RBA is judging the economy to be resilient. Because they're comparing it to data from 10 years ago, where we weren't getting the right story, or the right, or the full picture. Um, which is likely why we've seen, you know, back to back interest rate rises.

Nick · 23:29It could be argued that this is why money, um, monetary policy was over tightened in 2023. The RBA was looking at the hard data that was being boosted by compliance, such as cash usage falling, even though the economy was weakening. In other words, in the old days, the ABS under reported economic activity relative to the reporting today.

Nick · 23:51And they're making their decisions based on comparisons to historic data. So, it was really interesting, I thought. I don't know how you fix it, because at the end of the

Nick · 24:00day, Um, you can't go backwards. Um, people did what they did back then, and people are doing what they do now. Um, you can't really force people to use cash, because then you basically Assuming that they're trying to evade tax.

Nick · 24:13Um, I guess this opens another chemical can of worms based on getting the tax system right. So, it was very interesting, I thought,

Marty · 24:20Marty. I think like we do in business, you know, we, we catch up every month in order to go, where's the market at? What is happening? Um, how do we best navigate the next month?

Marty · 24:32It's very nimble, right? So, and I think It's, you can't, you can't go back to 2007. You've got to virtually do it on a weekly, monthly basis. And, you know, you've got to put resources around that, but then it's real time data. And then you're making, you know, strong decisions with real time data, not hindsight data or historical data.

Marty · 24:55I think you've got to come back to, you know, being, being in the

Marty · 25:00game. Being connected with the game that's being played now, and I think that's the only way through that, that we get an actual relevant result for everybody. Um, that's, that's my thought process on it, but I think they need to do that, because otherwise we're just, you know, people will be on fire without realising they're getting burnt, so it's like,

Nick · 25:20it's crazy.

Nick · 25:20And let's be honest, there's nothing better than having a couple of pineapples folded up in your pocket. How does that feel?

Marty · 25:27I still remember picking apples when I'm 17 and I got the envelope with the, you know, just the weekly pay and how good that felt. Yeah. You know, just, just, what a great

Nick · 25:38feeling.

Nick · 25:39Anyway.

Jason · 25:40Uh, absolutely love it, guys. We're just, you know, reminiscing on our days of getting envelopes with cash and, you know, are those days gone? Is it the death of the cash economy or is the numbers game going to create some kind of resurgence on people going out there and spending 5 on their local coffee at the cafe?

Jason · 25:58Um, let's see what happens,

Jason · 26:00boys, but I've enjoyed unpacking that. Nick, it's been a great insight into What is going on in the economy compared to now, compared to back then. And, uh, thank you for sharing listeners as always reach out to us. Uh, if you need us, we are here to help you. We're here to serve the numbers game.

Jason · 26:14Love sharing this information to provide more insight and better lives for our, for our listeners out there until next time,

Marty · 26:21cash is king. Don't be the joker game over. ---