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The Story of Australia's Currency: Decimalisation and the Dollar

Updated: 12 hours ago

Long before talk of a digital currency, the way Australians pay was changed forever with the introduction of the Australian Dollar in 1966. While not the first specie to circulate the shores of the southern continent, it proved to be an important milestone in its transformation from fledgling settlement to modern nation.


The story of Australia’s money begins with New South Wales Governor Lachlan Macquarie, who arrived in 1810 from Britain to assume control after a military coup - the ‘Rum Rebellion’ - removed his predecessor, William Bligh; the same Captain Bligh from the famed 1789 ‘mutiny on the Bounty’.



To provide sufficient currency for the colony, Macquarie imported forty-thousand Spanish eight-reale coins, widely circulated throughout the world at the time, and had them converted into ‘holey dollars’ - each marked by a hole punched through its middle. Currency supplied by England increased over the following decade, and in 1853 Australia’s first Royal Mint was created in Sydney.


The Australian Pound, first minted in 1910, represented a new stage in the country’s development. Federation had given Australia the power under its new constitution to make laws regarding its own currency, and denominations in both coins and notes were circulated with their British equivalents at the same value while the latter was gradually withdrawn.


The Pound was not perfect, however. Its value was divided into 20 shillings and 12 pence, and compared to a decimal currency – the type used by 95 per cent of the world’s population by the 1960s and many of Australia’s trading partners - it made money unnecessarily difficult. It also made the argument for decimalisation, which emphasised the system’s relative simplicity and economic efficiency, easy. Proposals to adopt an independent decimal currency had been made since the early days of the NSW colony: Governor Philip Gidley King made the case in 1800, and a 1902 committee of the House of Representatives concluded that decimal currency was the way forward well before the post-war Liberal government of Robert Menzies established the Decimal Currency Committee to move the idea forward. Not long after, the government announced that the 14th of February 1966 would be the beginning of a two-year transition to the dollar.



Face values of one, two, five, ten, twenty, and fifty cents were issued for coins and one, two, ten, and twenty dollars for notes. Five, and fifty, dollar notes were introduced later; the one-hundred dollar note was the last to arrive in 1984. Artists Stuart Devlin and Gordon Andrews were tasked with creating unique interpretations of Australia’s identity for the new coins and notes, and their designs successfully incorporated local fauna and notable figures from the nation’s history. Most of Devlin’s designs are still in circulation, though the appearance of the banknotes has changed significantly over time.



One and two cent coins became endangered species in 1992, when they were withdrawn from circulation “due to a loss of real purchasing power through inflation and the cost of minting the coins”2, though they remained legal tender. It’s now questionable whether carrying a few spare five, ten, or even twenty cent coins is worth the extra burden. But those not bothered by bulging pockets or who might not mind the dull clink of spare change may be disappointed to learn that there are restrictions on the use of cash as legal tender in Australia. For example, cash is not required to be accepted by all businesses, and you might come up short if you try to hand over more than $5 using any combination of 5, 10, 20, or 50 cent coins (well-informed cashiers will be familiar with section 16 of the Currency Act 1965 which prevents purse-wielding customers from holding up the line).3


The value of money

Not all currencies are created equal, but the Australian Pound was an exception - its value being equal to the British sterling from 1910. This made things simple for trade with Britain, Australia’s major trading partner, but world events would soon make things more complicated, and managing the currency’s value would prove difficult over the next one-hundred years.


In 1914, with the outbreak of war and the need for increased spending, Britain removed its currency from the gold standard (because the amount of money in circulation was tied to the nation’s stock of gold). Australia, with its currency tied to Britain’s, effectively did the same. Many nations experienced high levels of inflation because of wartime spending.


After the war, Britain sought the stability of the gold standard and returned to it in 1925 under the leadership of Winston Churchill. At this time, Australia had seen a decline in its terms of trade 4, driven by a decrease in the price of wool, its major export, and this, along with Britain’s decision to set the sterling’s rate of exchange into gold to its pre-war level, created pressure to devalue the Australian pound. In 1929, in response to economic pressures during the Great Depression, Australia left the gold standard, which resulted in a fall in the value of its pound. In December 1931, shortly after Britain left the gold standard for a second time, its exchange value was fixed at 1.25 pounds to 1 sterling; a twenty-five per cent reduction.


The 1944 Bretton Woods Agreement established a monetary system that required currencies be convertible to US dollars at a fixed rate (the US dollar itself remained convertible into gold bullion). Australia ratified the agreement with some reluctance due to disagreement over the inclusion of terms promoting full employment, though did not join the institutions it created – the International Monetary Fund (IMF) and what is now known as the World Bank – until 1947. In practice, the Australian pound’s value remained tied to the sterling. In 1966, the value of the Australian dollar was set at half a British Pound (and has remained close to this ever since).


The US left the gold standard in 1971, which effectively ended the Bretton Woods arrangements. The Australian dollar was then revalued and pegged to the US dollar instead of sterling in December of that year. With their money no longer backed by a commodity such as gold or silver (or others that have been used throughout history such as grain, corn, and tobacco), the US, and Australian, dollars became fiat currency.


After this, Australia experimented with different methods to manage its currency: first, the dollar was converted to a fluctuating exchange rate against the US dollar; second, it was valued against a basket of currencies called the trade-weighted index (TWI); finally, a managed exchange rate based on movements in major currencies was used from 1976 to 1983. In 1983, the Hawke government decided to float the dollar, which meant that its value would be allowed to fluctuate according to market forces.


Today, the Australian dollar is widely-traded in foreign exchange markets due to the country’s political stability and a relative lack of central bank intervention. Its value is thought to be significantly influenced by interest rates, commodity prices, the nation’s balance of trade, as well as risk sentiment and speculation. 5


The future of money

Will Australia’s next currency be digital? The Australian government has stated its intention to keep cash in our communities for “essential goods”6 at the same time as transitioning to an “economy-wide Digital ID ecosystem with an independent regulator” and exploring the implementation of a Central Bank Digital Currency (CBDC) 7. While the future of the country’s currency is uncertain, and significantly more complex than the past, it seems clear that cash is no longer king.


1 Cover: The archival resources of the Commonwealth in custody of the Reserve Bank of Australia by agreement with the National Archives of Australia. PN-000292

2 Royal Australian Mint. One Cent. https://www.ramint.gov.au/one-cent

3 Reserve Bank of Australia (2025). Legal Tender. https://banknotes.rba.gov.au/legal/legal-tender/

4 A ratio of export prices to import prices that indicates the amounts of imports an economy can purchase with the proceeds of its exports.

5 Reserve Bank of Australia (2025). Drivers of the Australian Dollar Exchange Rate. https://www.rba.gov.au/education/resources/explainers/drivers-of-the-aud-exchange-rate.html

6 Australian Government. Mandating cash acceptance. https://treasury.gov.au/sites/default/files/2024-12/c2024-604832-cp.pdf

7 Australian Government. A Strategic Plan for Australia’s Payments System. https://treasury.gov.au/sites/default/files/2023-06/p2023-404960.pdf


Sources

National Museum of Australia. Holey dollar. https://www.nma.gov.au/defining-moments/resources/holey-dollar




Coinage Act 1909 sourced from the Federal Register of Legislation at 20 April, 2025. https://www.legislation.gov.au/C1909A00006/latest/text





Royal Australian Mint. Circulating coins. https://www.ramint.gov.au/circulating-coins



Reserve Bank of Australia (2025). Legal Tender. https://banknotes.rba.gov.au/legal/legal-tender/


Gruen, David. 19th Annual Colin Clark Memorial Lecture. What have we learnt? The Great Depression in Australia from the perspective of today. https://treasury.gov.au/speech/19th-annual-colin-clark-memorial-lecture


Cornish, Selwyn. Inside Story. Bretton Woods at seventy-five. https://insidestory.org.au/bretton-woods-at-seventy-five/


Bordo, Michael D. National Bureau of Economic Research. The Bretton Woods International Monetary System: A Historical Overview. https://www.nber.org/system/files/chapters/c6867/c6867.pdf


Federal Reserve Bank of St. Louis. FRASER. The International Gold Standard and US Monetary Policy from World War One to the New Deal. https://fraser.stlouisfed.org/files/docs/meltzer


The Department of Foreign Affairs and Trade. Australia’s Trade Through Time. https://www.dfat.gov.au/publications/minisite/tradethroughtimegovau/site/index.html



Reserve Bank of Australia (2025). The Exchange Rate and the Reserve Bank's Role in the Foreign Exchange Market. https://www.rba.gov.au/mkt-operations/ex-rate-rba-role-fx-mkt.html


Reserve Bank of Australia (2025). Drivers of the Australian Dollar Exchange Rate. https://www.rba.gov.au/education/resources/explainers/drivers-of-the-aud-exchange-rate.html


Reserve Bank of Australia (2025). The Australian Dollar: Thirty Years of Floating https://www.rba.gov.au/speeches/2013/sp-gov-211113.html


Reserve Bank of Australia (2025). Research Guide: Float of the Australian Dollar https://unreserved.rba.gov.au/nodes/view/88861


Crowley, Tom. ABC. Federal government to require businesses to accept cash for fuel, groceries. https://www.abc.net.au/news/2024-11-18/government-to-require-businesses-accept-cash/104612084


Reserve Bank of Australia (2025). Central Bank Digital Currency. https://www.rba.gov.au/payments-and-infrastructure/central-bank-digital-currency/


Commonwealth of Australia. The Treasury. Central bank digital currency and the future of digital money in Australia. https://treasury.gov.au/publication/p2024-581588

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