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RBA survey: 56% of experts predict a cashless Australia by 2031

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Cash is dying and COVID-19 is speeding its death, according to experts.

In this month's Finder RBA Cash Rate Survey™, more than half of the respondents (56%, 14/25*) believe that Australia will become fully cashless within the next 10 years.

A vast majority (89%, 25/28) believe COVID-19 is accelerating this eventuality.

Finder's analysis of RBA data shows that the number of ATM withdrawals has fallen by 65% since its peak in December 2008.

Graham Cooke, head of consumer research at Finder, said the lifespan for paper money is shortening.

"Finder predicted a cashless society in Australia by 2036 a few years back and now even that time line may be too far away.

"The latest data shows that July 2021 had by far the lowest number of withdrawals of any July on record.

"Cash has already been pushed to the edges of our economy, and cash-only businesses are few and far between. Expect them to get even rarer," Cooke said.

A Finder survey of 1,015 Australians found that 40% are using less cash than this time last year.

The research also found that out of 10 in-person transactions, more than half make one or fewer with cash (23% make zero, 28% only make one).

60% think the submarine deal will hurt Chinese relations

More than half of experts (60%, 15/25) believe that the Australian submarine deal risks damaging economic relations with China, with some economists predicting grave repercussions.

Matthew Peter of QIC said, "Chinese authorities will discourage or ban tourism and study in Australia."

Julia Newbould of Money Magazine said, "China will look to become more self-sufficient and not limit itself to economic deals with one nation."

A few economists who didn't think the sub deal would have an effect seem to think the damage has already been done.

Mark Crosby of Monash University said, "Relations are already damaged beyond repair as long as Xi Jinping is president and we don't kowtow to him."

Cooke said relations with China have deteriorated in recent years, and the situation will need to be carefully monitored to make sure trade remains healthy.

"China is by far Australia's biggest international trade partner, generating 10 times the trade of the United Kingdom.

"Australia's recent announcement of a trade deal with the UK is great, but China is far more important," Cooke said.

Cash rate will hold until 2023, employment outlook brightens

All panellists (39/39) expect a cash rate hold in October, and 77% (30/39) expect the rate to remain stagnant until 2023 at 0.10%.

Michael Yardney of Metropole Property Strategists said a rate rise would be a shock.

"Governor Phillip Lowe has made it clear – he virtually said 'read my lips, rates aren't rising any time soon'."

Cooke said this would be an historic level of stagnation.

"If our panel is correct, we are in the first third of a 26-month period of a flat cash rate.

"This would be the second longest in history after the 34-month hold at 1.50% between 2016 and 2019," Cooke said.

While the cash rate may be staying still, experts are feeling good about employment with lockdowns beginning to ease.

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Finder's Economic Sentiment Tracker gauges experts' confidence in 5 key indicators: housing affordability, employment, wage growth, cost of living and household debt over the next 6 months.

Positive sentiment towards employment shot up dramatically over the last month, from 28% in September to 52% in October.

*Experts are not required to answer every question in the survey

Here's what our experts had to say:

Nicholas Frappell, ABC Bullion: "Central banks are slowly pivoting towards a tighter environment and that price pressures in the domestic economy post-reopening may justify an earlier hike."

Shane Oliver, AMP Capital: "The RBA's stated conditions for a rate hike, i.e. actual inflation sustainably in the 2-3% target zone, are far from being met. This will require sustained unemployment of around 4% and wage growth of 3% or more and that's a fair way off."

David Robertson, Bendigo Bank: "The timing of the first RBA interest rate rise is still most likely to be mid-2023 as our economy recovers and tighter labour markets drive wages growth, but other competing forces are ever-present. Trade and geopolitical developments continue to complicate the outlook."

Sean Langcake, BIS Oxford Economics: "The lockdowns through 2021 will delay progress toward faster wage growth and the first rate rise."

Peter J Tulip, CIS: "Inflation will remain below the RBA's target till 2024."

Peter Boehm, CLSA Premium: "The RBA's hands are tied – it cannot move interest rates given the state of the economy and the ongoing uncertainties surrounding most Labour premiers' position on opening up their state borders. Only sensible policies around opening up the Australian economy and federal government fiscal stimuli can have positive impacts on the direction of the Australian economy. Changing the cash rate (even down) is, for now, a somewhat useless tool in helping to support the Australian economy."

Saul Eslake, Corinna Economic Advisor: "As before, I take the RBA at its word when it says it won't increase the cash rate until underlying inflation is sustainably within the 2-3% target range, and that that won't occur until the labour market is sufficiently tight to have pushed annual wage inflation above 3%. Dr Lowe 'doubled down' on that in a speech earlier this month. I think its criteria may well be met before 2024, but I don't think they'll be met before 2023."

Nicholas Gruen, DYSCALL: "I'm guessing that demand will be stronger than people expect because of balance sheet effects after opening up – that together with supply constraints owing to COVID disruption as in other countries."

Craig Emerson, Emerson Economics: "RBA statements that it does not envisage increasing the cash rate before 2024."

Mark Brimble, Griffith University: "The global economy is still being fed significant stimulus and the RBA will want to have inflation return towards the target range sustainably prior to moving the rate."

Tim Nelson, Griffith University: "As COVID impacts start to become more muted, the economy will pick up but will take time. Monetary policy is likely to adjust in 2022."

Tony Makin, Griffith University: "If US and Australian inflation numbers continue to exceed expectations, both the Fed and RBA will be forced to wind back their QE programs and raise official rates. Given the COVID lockdowns here are having a bigger macroeconomic impact here than abroad, the RBA may however be slower to act."

Tim Reardon, Housing Industry Association: "Sustained inflation and wage growth won't be where the RBA wants them to be before 2023."

Michael Witts, ING Bank: "Recent RBA guidance suggests that the Bank is unlikely to move rates until well into 2023 or later."

Mathew Tiller, LJ Hooker: "Despite property market performance remaining strong, the RBA continues to publicly maintain that it intends to hold rates steady for the next few years."

Geoffrey Harold Kingston, Macquarie University: "Recovery has been delayed by the current wave of the virus."

Jeffrey Sheen, Macquarie University: "Though there remain significant sources of uncertainty, I expect the domestic and global economy to have normalised enough in 2023 to justify a gradual increase in the cash rate."

Michael Yardney, Metropole Property Strategists: "Governor Phillip Lowe has made it clear – he virtually said 'read my lips, rates aren't rising any time soon'."

Mark Crosby, Monash University: "Well signalled by the RBA for rates not to rise before 2023. However, rising inflation will likely see them move sooner than markets currently anticipate."

Julia Newbould, Money Magazine: "I can't see that there is any reason why the RBA would not hold rates for the near future."

Susan Mitchell, Mortgage Choice: "The Reserve Bank remains steadfast in its commitment to achieving its inflation target and a return to full employment before raising the nation's cash rate. The low cost of borrowing is fuelling strong activity in the nation's housing market, with ABS data revealing a surge in residential property prices of 6.7% in the June quarter."

Dr Andrew Wilson, My Housing Market: "Clearly no case for higher rates in the foreseeable future given current fragile economic circumstances."

Alan Oster, NAB: "Inflation and wages will not hit targets till early 2024."

Malcolm Wood, Ord Minnett: "It will take some time for inflation to be sustainably within the 2-3% target band."

Rich Harvey, Propertybuyer: "RBA consistently said rates will not rise until 2023."

Matthew Peter, QIC: "The RBA is constrained to year end. It can't take a more hawkish stance until the impact of reopenings of state economies is known. The RBA will wait until after its summer break to decide its next move."

Noel Whittaker, QUT: "I think by then, most people will be vaccinated, lockdowns will be no more and business will be getting back to normal."

Cameron Kusher, REA Group: "The RBA has been steadfast that it won't move rates until inflation is comfortably within band. I've seen nothing over the past month that changes my view that will happen before 2023."

Christine Williams, Smarter Property Investing: "As we come out of COVID – and with the savings that are happening – the RBA will have ample reason to increase rates."

Mala Raghavan, University of Tasmania: "The cash rate will only rise, provided Australia's key macroeconomic indicators are on a stable trajectory path. As long as COVID uncertainty is hanging over the economy, it is hard to predict when we will reach that comfortable spot."

Jonathan Chancellor, "The first move by the RBA will likely be to nudge the regulator into macro-prudential measures."

Dale Gillham, Wealth Within: "Whilst economic growth was down in 2nd quarter 2021, GDP is up 9.6% for the year. Given lockdowns around Australia are likely to ease if not end completely by the end of 2021 or into early 2022, I expect the economy will bounce back quite well."

Brodie Haupt, WLTH: "With continued lockdowns and rising pressure on the economy, I don't think there will be a change to the cash rate until 2023."

Jakob B. Madsen: "The interest rate is deemed to go up at the world level because of the ageing world population."

Other respondents: Angela Jackson, Equity Economics; Alex Joiner, IFM Investors; Ben Udy, Capital Economics; Leanne Pilkington, Laing + Simmons; and Bill Evans, Westpac.

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