Australian pound

Earlier Australian currencies

The history of currency in Australia could be said to begin in 1800, when Governor Philip Gidley King issued a proclamation setting the value of a variety of foreign coins in New South Wales. However, because of the shortage of any sort of money, the real currency during the first twenty-five years of settlement was rum, leading to terms such as the "Rum Corps" and the "Rum Rebellion".

Australia's first coinage was issued in 1813 by the colony of New South Wales by punching the middle out of Spanish dollars. This process created two parts: a small coin, which was called the dump in Australia, and a ring, which was called a holey dollar. One holey dollar was worth five shillings (a quarter of one pound sterling), and one dump was worth one shilling and three pence (or one quarter of a holey dollar). This was done in order to keep the coins in New South Wales, as they would be valueless elsewhere.

In 1825, an Imperial order-in-council was issued with the purpose of introducing sterling coinage to all the British colonies. This was due to the introduction of the gold standard in the UK in 1816, and a decline in the supply of Spanish dollars. Most of the dollars used had been minted in Lima, Mexico City, and Potosí, which had become part of new Latin American republics, independent from Spain.

From 1817, when the first bank, the Bank of New South Wales, was established, private banks issued paper money denominated in pounds. Acceptance of private bank notes was not made compulsory by legal tender laws but they were widely used and accepted. In 1852, the Government Assay Office in Adelaide issued gold pound coins. These weighed slightly more than sovereigns. From 1855, the Sydney mint issued half sovereigns and sovereigns, with the Melbourne mint beginning production in 1872. Many of the sovereigns minted in Australia were for use in India as part of a plan that the gold sovereign should become the imperial coin. As it turned out, India was already too entrenched in the Rupee system, and the gold sovereigns obtained by the treasury in India never left the vaults.

Thus, in the lead-up to Federation, the currency used in the Australian colonies consisted of British silver and copper coins, Australian minted gold sovereigns (worth £1) and half sovereigns, locally minted copper trade tokens (suppressed in 1881, some state earlier) and private bank notes. In addition, the Queensland government issued treasury notes (1866–1869) and banknotes (1893–1910) which were legal tender in Queensland; and the New South Wales government issued a limited series of treasury notes in 1893.

After Federation in 1901, the Australian government assumed power over currency matters and began overprinting the private issues that were in circulation, in preparation for the issue of a domestic currency. In 1910 the federal government passed the "Australian Notes Act" which prohibited the circulation of State notes and gave control over the issue of Australian notes to the Commonwealth Treasury. Also passed in that year was the "Bank Notes Tax Act" which imposed a tax of 10% per annum on "all bank notes issued or re-issued by any bank in the Commonwealth after the commencement of this Act, and not redeemed". Both these acts remain on the statute books and perpetuate the de facto end of private currencies in Australia.

National currency

In 1910 a national currency was introduced by the Labor Government of Prime Minister Andrew Fisher. The new national currency was called the Australian pound, consisting of 20 shillings, each consisting of 12 pence. Monetary policy ensured that the Australian pound was fixed in value to the pound sterling. As such Australia was on the gold standard so long as Britain was.

In 1914, the pound sterling was removed from the gold standard. When it was returned to the gold standard in 1925, the sudden increase in its value (imposed by the nominal gold price) unleashed crushing deflationary pressures. Both the initial 1914 inflation and the subsequent 1926 deflation had far-reaching economic effects throughout the British Empire, Australia and the world. In 1929, as an emergency measure during the Great Depression, Australia left the gold standard, resulting in a devaluation relative to sterling. A variety of pegs to sterling applied until December 1931, when the government set a rate of £1 Australian = 16 shillings sterling (£1·5s Australian = £1 sterling).

During World War II, the Empire of Japan produced currency notes, some denominated in the Australian pound, for use in Pacific countries intended for occupation. Since Australia was never occupied, the occupation currency was not used there, but it was used in the captured parts of the then-Australian territories of Papua and New Guinea.

In 1949, when the United Kingdom devalued the pound sterling against the US dollar, Australian Prime Minister and Treasurer Ben Chifley followed suit so the Australian pound would not become over-valued in sterling zone countries with which Australia did most of its external trade at the time. As the pound sterling went from US$4.03 to US$2.80, the Australian pound went from US$3.224 to US$2.24.

Historic £1 note

In May 2015, the National Library of Australia announced that it had discovered the first £1 banknote printed by the Commonwealth of Australia, among a collection of specimen banknotes. This uncirculated Australian Pound (£1) note, with the serial number (red-ink) P000001, was the first piece of currency to carry the Coat of Arms of Australia

Decimalisation

In February 1959 the Commonwealth Government appointed a Decimal Currency Committee to investigate the advantages and disadvantages of a decimal currency, and, if a decimal currency was favoured, the unit of account and denominations of subsidiary currency most appropriate for Australia, the method of introduction and the cost involved.

The Committee presented its report in August 1960. It recommended the date of introduction of the new system to be the second Monday in February, 1963.

In July 1961 the Commonwealth Government confirmed its support of a decimal currency system, but considered it undesirable to make final decisions on the detailed arrangement that would be necessary to effect the change.

On 7 April 1963 the Commonwealth Government announced that a system of decimal currency was to be introduced into Australia at the earliest practicable date, and gave February 1966, as the tentative change-over date.

On 14 February 1966, a decimal currency, the dollar of one hundred cents, was introduced.

Under the implementation conversion rate, £1 was set as the equivalent of $2. Thus, 10s became $1 and 1s became 10c. The conversion rate was problematic for the pre-decimal penny since the shilling was divided into twelve pence. An exchange rate of $2.40:£1 would have allowed for accurate conversion down to the penny, with one penny becoming one cent; however, the Government thought it more important that the new currency unit be more valuable than the United States dollar which it would not have been under a 2.4:1 ratio.

Amounts less than a shilling were converted as follows:

Coins

In 1855, gold full and half sovereigns (worth respectively one pound sterling and ten shillings) were first minted by the Sydney Mint. These coins were the only non-Imperial denominations issued by any of the Australian mints until after Federation (the Sydney Mint struck Imperial gold sovereigns and half sovereigns starting in 1871, and the Melbourne Mint starting 1872).

In 1910, .925 fineness sterling silver coins were minted in denominations of 3d, 6d, 1s and 2s (the last known as a florin). Unlike in the United Kingdom, no half crowns (worth 2s 6d) were issued. Bronze  ¹⁄₂d and 1d coins followed in 1911. Production of half-sovereigns ceased in 1916, followed by that of sovereigns in 1931. In 1937 a crown (or five-shilling piece) was issued to commemorate the coronation of King George VI. This coin proved unpopular for actual use and was discontinued shortly after being reissued in 1938.

In 1946, the fineness of Australian silver sixpences, shillings, and florins was reduced to .500, a quarter of a century after the same change had been made in Britain. In New Zealand and the United Kingdom, silver was soon abandoned completely for the everyday coinage, but these Australian half-silver coins continued to be minted until after decimalization.