While counterfeiting is seen as a relatively minor problem in Australia, recent research from the Reserve Bank of Australia shows that it is actually quite significant, particularly for small businesses.
Initially the data compiled by researchers appears to support the belief that counterfeiting isn't much of an issue in Australia. The most recent figures, from 2013, indicate that in that year AU$1.2 million ($959,220) worth of fake notes were detected. That amounts to 16 out of every one million notes minted in Australia, at a cost of 5 cents per person. In other places, for instance the euro zone, counterfeiting costs individuals more than twice as much per person. Still, the RBA found something alarming after a thorough examination of counterfeit money in Australia.
Fake bills could cost small businesses the most
The more concerning issue is apparent when the breakdown of who discovered the counterfeit notes is examined. The RBA report noted that 32 percent of the fakes were discovered by the reserve bank, as well as other money management firms, 10 percent were found by the general public and 34 percent were caught by businesses. Of the businesses that recognized the fake bills, many of them were supermarkets, restaurants, cafes and fast food outlets.
"Businesses could see a day's worth of transactions wiped out."
Small businesses are coming across these counterfeit notes more often than other participants in the Australian economy for a reason. Low-income households are often restricted to using cash more often than not, and the small businesses that they frequent are usually the recipients of those bills. Because of this these households and the businesses that they frequent are more susceptible to the costs of counterfeits than others. The report noted that some of these businesses could see an entire day's worth of transactions wiped out because of the effects of forgeries.
The researchers also designed a model based on the Australian data to illustrate the social cost of an increase in counterfeit notes over the course of a decade. It was noted that an increase in fake bills would drive a decrease in consumer confidence in Australian banknotes. If the general public were to lose faith in the product authenticity of bills, they would likely turn to using credit cards and bank deposits instead. Based on this theory, the researchers found that if there were an AU$140,000 increase in counterfeit notes over the course of ten years, the social cost would be AU$7 million.
Counterfeit banknotes on the rise in Australia
In 2014 it was found that the number of counterfeit bills in Australia had increased over the course of the previous four years to 18,000 detected notes, up from 8,500. At the time it was observed that while the number of fake bills circulating was still low, the level was inching up. The RBA's recent report on counterfeiting in Australia suggests that if this trend continues, the eventual cost could be significant. In response to the 2014 discovery of a spike in fake notes, the RBA planned a redesign of Australian currency.
"We have noticed in the last few years though, that people are getting better," Michele Bullock, the reserve bank's assistant governor for currency, explained. "Technology is getting better, it's getting cheaper, people are able to print banknotes, more onto plastic substrates and we've had an example about three, four years ago where we did have a counterfeiting attack in Australia and it was on plastic substrate, so that was quite important."
With polymer and the technology required to counterfeit banknotes more readily available to criminals than ever before, it has become important to redesign currencies to ensure authenticity and prevent fakes from making their way into circulation. Even in places such as Australia, where counterfeiting is generally seen to be a minor issue, the hidden costs could be significant.