Australian dollar

Before the adoption of the current Australian dollar in 1966, Australia's currency was the Australian pound, which like the British pound sterling was divided into 20 shillings and each shilling was divided into 12 pence, making a pound worth 240 pence. The Australian pound was introduced in 1910 at par with the pound sterling or A£1 = UK£1 until 1931, when it was devalued to A£1 = UK£0.8 or 16 shillings UK.[6]

In 1902, a select committee of the House of Representatives, chaired by George Edwards, had recommended that Australia adopt a decimal currency with the pound divided into ten florins and the florin into 100 cents.[7] In 1937, the Banking Royal Commission[note 1] appointed by the Lyons Government had recommended that Australia adopt "a system of decimal coinage … based upon the division of the Australian pound into 1000 parts".[8]

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 recommended that a new currency be introduced in February 1963, with the adoption to be modelled on South Africa's replacement of the South African pound with the rand worth 10 shillings or 1⁄2 pound. The Menzies Government announced its support for decimalisation in July 1961, but delayed the process in order to give further consideration to the implementation process.[9] In April 1963, Holt announced that a decimal currency was scheduled to be introduced in February 1966, with a base unit equal to 10 shillings, and that a Decimal Currency Board would be established to oversee the transition process.[8]

A public consultation process was held in which over 1,000 names were suggested for the new currency. In June 1963, Holt announced that the new currency would be called the "royal". This met with widespread public disapproval, and three months later it was announced that it would instead be named the "dollar".[10]

The Australian pound was replaced by the Australian dollar on 14 February 1966[11] with the conversion rate of A$2 = A£1. Since Australia was still part of the fixed-exchange sterling area, the exchange rate was fixed to the pound sterling at a rate of A$1 = 8 U.K. shillings (or UK£1 = A$2.50, and in turn UK£1 = US$2.80). In 1967, Australia effectively left the sterling area when the pound sterling was devalued against the US dollar from US$2.80 to US$2.40, but the Australian dollar chose to retain its peg to the US dollar at A$1 = US$1.12 (hence appreciating in value versus sterling).

The Australian dollar is legal tender in its external territories: Christmas Island, Cocos (Keeling) Islands, and Norfolk Island; and is also official currency in Kiribati, Nauru, and Tuvalu. It was legal tender in Papua New Guinea until 31 December 1975 when it was replaced by the Papua New Guinean kina, and in Solomon Islands until 1977 when it was replaced by the Solomon Islands dollar.

The Royal Australian Mint also has an international reputation for producing quality numismatic coins. It has first issued commemorative 50-cent coins in 1970, commemorating James Cook's exploration along the east coast of the Australian continent, followed in 1977 by a coin for Queen Elizabeth II's Silver Jubilee, the wedding of Charles, Prince of Wales and Lady Diana Spencer in 1981, the Brisbane Commonwealth Games in 1982, and the Australian Bicentenary in 1988. Issues expanded into greater numbers in the 1990s and the 21st century, responding to collector demand. Commemorative designs have also been featured on the circulating two dollar, one dollar, and 20 cent coins.

In commemoration of the 40th anniversary of decimal currency, the 2006 mint proof and uncirculated sets included one- and two-cent coins. In early 2013, Australia's first triangular coin was introduced to mark the 25th anniversary of the opening of Parliament House. The silver $5 coin is 99.9% silver, and depicts Parliament House as viewed from one of its courtyards.[13]

The first paper issues of the Australian dollar were issued in 1966. The $1, $2, $10 and $20 notes had exact equivalents in the former pound notes. The $5 note was issued in 1967, the $50 was issued in 1973 and the $100 was issued in 1984.[14]

The $1 banknote was replaced by a $1 coin in 1984, while the $2 banknote was replaced by a smaller $2 coin in 1988.[15] Although no longer printed, all previous notes of the Australian dollar are still considered legal tender.[16]

Shortly after the changeover, substantial counterfeiting of $10 notes was detected. This provided an impetus for the Reserve Bank of Australia to develop new note technologies jointly with the Commonwealth Scientific and Industrial Research Organisation, culminating in the introduction of the first polymer banknote in 1988.

Australia was the first country to produce polymer banknotes,[17] more specifically made of polypropylene polymer, which were produced by Note Printing Australia. These revolutionary polymer notes are cleaner than paper notes, are more durable and easily recyclable.

The first polymer banknote was issued in 1988 as a $10 note[18] commemorating the bicentenary of European settlement in Australia. The note depicted on one side a young male Aboriginal person in body paint, with other elements of Aboriginal culture. On the reverse side was the ship Supply from the First Fleet, with a background of Sydney Cove, as well as a group of people to illustrate the diverse backgrounds from which Australia has evolved over 200 years.

The first polymer series was rolled out starting 1992 and featured the following persons:

• The $100 note features world-renowned soprano Dame Nellie Melba (1861–1931), and the distinguished soldier, engineer and administrator General Sir John Monash (1865–1931).[19]
• The $50 note features Aboriginal writer and inventor David Unaipon (1872–1967), and Australia's first female parliamentarian, Edith Cowan (1861–1932).[20]
• The $20 note features the founder of the world's first aerial medical service (the Royal Flying Doctor Service of Australia), the Reverend John Flynn (1880–1951), and Mary Reibey (1777–1855), who arrived in Australia as a convict in 1792 and went on to become a successful shipping magnate and philanthropist.[21]
• The $10 note features the poets AB "Banjo" Paterson (1864–1941) and Dame Mary Gilmore (1865–1962). This note incorporates micro-printed excerpts of Paterson's and Gilmore's work.[22]
• The $5 note features Her Majesty Queen Elizabeth II and Parliament House, Canberra, the national capital.[23]

A special centenary issue of the $5 note featured Sir Henry Parkes and Catherine Helen Spence in 2001. In 2015–2016 there were petitions to feature Fred Hollows on the upgraded $5 note, but failed to push through when the new note was introduced on 1 September 2016.[24][25][26]

Australia also prints polymer banknotes for a number of other countries through Note Printing Australia, a wholly owned subsidiary of the Reserve Bank of Australia. Note Printing Australia prints polymer notes or simply supplies the polymer substrate[27] for a growing number of other countries including Bangladesh, Brunei, Chile, Kuwait, Malaysia, Mexico, Nepal, New Zealand, Papua New Guinea, Romania, Samoa, Singapore, Solomon Islands, Sri Lanka and Vietnam. Many other countries are showing a strong interest in the new technology.

On 27 September 2012, the Reserve Bank of Australia stated that it had ordered work on a project to upgrade the current banknotes. The upgraded banknotes would incorporate a number of new future proof security features [28] and include tactile features like Braille dots for ease of use of the visually impaired. [29][30] All persons featured on the first polymer series were retained on the second polymer series.

The cost of one Euro in Australian Dollar.

Prior to 1983, Australia maintained a fixed exchange rate. The Australian pound was initially at par from 1910 with the British pound or A£1 = UK£1; from 1931 it was devalued to A£1 = UK£0.8 or 16 shillings sterling. This reflected its historical ties as well as a view about the stability in value of the British pound.

From 1946 to 1971, Australia maintained a peg under the Bretton Woods system, a fixed exchange rate system that pegged the U.S. dollar to gold, but the Australian dollar was effectively pegged to sterling until 1967 at UK£1 = A£1.25 = A$2.50 = US$2.80. In 1967 Australia did not follow the pound sterling devaluation and remained fixed to the U.S. dollar at A$1 = US$1.12.

With the breakdown of the Bretton Woods system in 1971, Australia converted the traditional peg to a fluctuating rate against the US dollar. In September 1974, Australia valued the dollar against a basket of currencies called the trade weighted index (TWI) in an effort to reduce the fluctuations associated with its tie to the US dollar.[38] The daily TWI valuation was changed in November 1976 to a periodically adjusted valuation.

The highest valuation of the Australian dollar relative to the U.S. dollar was during the period of the peg to the U.S. dollar. On 9 September 1973, the peg was adjusted to US$1.4875, the fluctuation limits being changed to US$1.485–US$1.490;[39] on both 7 December 1973 and 10 December 1973, the noon buying rate in New York City for cable transfers payable in foreign currencies reached its highest point of 1.4885 U.S. dollars to one dollar.[40]

In December 1983, 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. The decision was made on 8 December 1983 and announced on 9 December 1983.[41]

In the two decades that followed, its highest value relative to the US dollar was $0.881 in December 1988. The lowest ever value of the dollar after it was floated was 47.75 US cents in April 2001.[42] It returned to above 96 US cents in June 2008,[43] and reached 98.49 later that year. Although the value of the dollar fell significantly from this high towards the end of 2008, it gradually recovered in 2009 to 94 US cents.

On 15 October 2010, the dollar reached parity with the US dollar for the first time since becoming a freely traded currency, trading above US$1 for a few seconds.[44] The currency then traded above parity for a sustained period of several days in November, and fluctuated around that mark into 2011.[45] On 27 July 2011, the dollar hit a record high since floating, at $1.1080 against the US dollar.[46] Some commentators speculated that its high value that year was related to Europe's sovereign debt crisis, and Australia's strong ties with material importers in Asia and in particular China.[47]

Since the end of the China's large-scale purchases of Australian commodities in 2013, however, the Australian dollar's value versus the US dollar has since plunged to $0.88 as of end-2013, and to as low as $0.57 in March 2020. As of 2021, it has traded at a range of $0.71 to $0.80.

In 2016, the Australian dollar was the fifth most traded currency in world foreign exchange markets, accounting for 6.9% of the world's daily share (down from 8.6% in 2013)[48] behind the United States dollar, the euro, the Japanese yen and the pound sterling.

The Australian dollar is popular with currency traders, because of the comparatively high interest rates in Australia, the relative freedom of the foreign exchange market from government intervention, the general stability of Australia's economy and political system, and the prevailing view that the Australian dollar offers diversification benefits in a portfolio containing the major world currencies, especially because of its greater exposure to Asian economies and the commodities cycle.[49]

Economists posit that commodity prices are the dominant driver of the Australian dollar, and this means changes in exchange rates of the Australian dollar occur in ways opposite to many other currencies.[50] For decades, Australia's balance of trade has depended primarily upon commodity exports such as minerals and agricultural products. This means the Australian dollar varies significantly during the business cycle, rallying during global booms as Australia exports raw materials, and falling during recessions as mineral prices slump or when domestic spending overshadows the export earnings outlook. This movement is in the opposite direction to other reserve currencies, which tend to be stronger during market slumps as traders move value from falling stocks into cash.

The Australian dollar is a reserve currency and one of the most traded currencies in the world.[49] Other factors in its popularity include a relative lack of central bank intervention, and general stability of the Australian economy and government.[51] In January 2011 at the World Economic Forum in Davos, Switzerland, Alexey Ulyukaev announced that the Central Bank of Russia would begin keeping Australian dollar reserves.[52]

Most traded currencies by value
Currency distribution of global foreign exchange market turnover[53]

Rank	Currency	ISO 4217 code	Symbol	Proportion of daily volume, April 2019
1	United States dollar	USD	US$	88.3%
2	Euro	EUR	€	32.3%
3	Japanese yen	JPY	円 / ¥	16.8%
4	Pound sterling	GBP	£	12.8%
5	Australian dollar	AUD	A$	6.8%
6	Canadian dollar	CAD	C$	5.0%
7	Swiss franc	CHF	CHF	5.0%
8	Renminbi	CNY	元 / ¥	4.3%
9	Hong Kong dollar	HKD	HK$	3.5%
10	New Zealand dollar	NZD	NZ$	2.1%
11	Swedish krona	SEK	kr	2.0%
12	South Korean won	KRW	원 / ₩	2.0%
13	Singapore dollar	SGD	S$	1.8%
14	Norwegian krone	NOK	kr	1.8%
15	Mexican peso	MXN	$	1.7%
16	Indian rupee	INR	₹	1.7%
17	Russian ruble	RUB	₽	1.1%
18	South African rand	ZAR	R	1.1%
19	Turkish lira	TRY	₺	1.1%
20	Brazilian real	BRL	R$	1.1%
21	New Taiwan dollar	TWD	NT$	0.9%
22	Danish krone	DKK	kr	0.6%
23	Polish złoty	PLN	zł	0.6%
24	Thai baht	THB	฿	0.5%
25	Indonesian rupiah	IDR	Rp	0.4%
26	Hungarian forint	HUF	Ft	0.4%
27	Czech koruna	CZK	Kč	0.4%
28	Israeli new shekel	ILS	₪	0.3%
29	Chilean peso	CLP	CLP$	0.3%
30	Philippine peso	PHP	₱	0.3%
31	UAE dirham	AED	د.إ	0.2%
32	Colombian peso	COP	COL$	0.2%
33	Saudi riyal	SAR	﷼	0.2%
34	Malaysian ringgit	MYR	RM	0.1%
35	Romanian leu	RON	L	0.1%
…	Other			2.2%
Total[note 2]				200.0%

• United States dollar
• Euro
• Japanese yen
• Pound sterling
• Canadian dollar
• Swiss franc