Cash economy under pressure
In his budget speech earlier this month, Treasurer Scott Morrison put Australians who deal in large cash amounts on notice.
Acting on the recommendations of the Black Economy Taskforce, Morrison announced that the government would be outlawing cash payments of greater than $10,000 from next year.
The ban, he said, would help shine a light on the underground economy, the value of which was about $30 billion in 2010–11, according to the Australian Bureau of Statistics.
Morrison said the move was among a number of measures that would enable the government to claw back an estimated $5.3 billion in lost tax revenue over the next four years.
“This will be bad news for criminal gangs, terrorists and those who are just trying to cheat on their tax or get a discount for letting someone else cheat on their tax,” said the treasurer.
As far as privacy advocates are concerned, however, those aren’t the only people the move is bad news for. They see the development, and the signal it sends about the seemingly inevitable march towards a cashless society, as having serious implications for the privacy of ordinary Australians.
“I think this is part of an underlying philosophy which is that people shouldn’t be able to have privacy when it comes to their transactions because they could potentially do wrong, and the government has a right to know what you are doing with your life,” says Matthew Lesh, a research fellow at the Institute of Public Affairs, a libertarian think tank.
A government spokesman told The Saturday Paper the new limits on cash would not affect most transactions and that privacy was a top priority.
“The government takes people’s privacy very seriously,” said a media adviser to Financial Services Minister Kelly O’Dwyer. “Australia has long-established prudential, regulatory and legal obligations which require banks to manage their data and security risks.”
For governments, the attraction of electronic transactions is obvious. Unlike cash transactions, every credit card payment or bank transfer leaves a digital record that is potentially accessible to the taxman, as well as law enforcement, security agencies and, conceivably, any number of other government and non-government entities.
While the public has readily embraced using plastic of its own accord, with just 37 per cent of payments in Australia made with cash in 2016, authorities here and overseas have appeared keen to nudge citizens towards a completely cashless future.
Marvin Goodfriend, Donald Trump’s nominee to serve on the Federal Reserve’s board of governors, has notably entertained the outright abolition of paper money. In 2016, the Indian government tried to withdraw 86 per cent of all currency in circulation before it was forced into a hasty retreat due to the public’s inordinate dependence on the informal economy.
In Australia, economists and prominent politicians including shadow assistant treasurer Andrew Leigh have proposed the less drastic step of ditching the $100 bill because of its disproportionate use by criminals. In its report to Treasury, the Black Economy Taskforce recommended a number of other measures to limit cash, including a ban on employers paying cash wages, which have yet to be adopted by the government. Although Treasury has said cash will remain a legitimate means of purchasing goods and services, it notably touted its $10,000 cash-purchase ban under the banner of “encouraging the transition to a digital society”.
Privacy campaigners believe such moves are likely to be just the beginning of an escalating crackdown on cash.
“You get to this point where they are using the precedent that’s been set, and the fact that no one has really ever properly opposed it in the past, in order to keep just pushing forward policy,” says Lesh.
Despite the government’s focus on tax evasion and illicit industries, Lesh says there are legitimate reasons for law-abiding individuals to deal in even relatively large cash sums.
“The case which comes to mind, particularly, is a financially abusive relationship, which is something that’s defined quite broadly across literature, and it’s the idea that somebody is trying to control you by telling you how you can and can’t spend your money in a relationship or in a family situation,” he says. “Now if you’re somebody who has been in a financially abusive relationship, cash is a good solution to be able to control your own affairs because it doesn’t have the record which you have naturally from a financial electronic transaction.
“Cash is about as responsible for illegal activity as condoms are for sexual frivolity,” he adds.
Those sceptical of the drive towards a cashless society are also wary of how future, more intrusive governments might seek to use people’s financial histories. Following Morrison’s budget speech, Australian Conservatives senator Cory Bernardi struck a rare note of dissent in parliament by warning of the “potential ‘Big Brother’ implications” of moves to limit the use of cash.
“If everything you spend is traceable then so too is what you eat, drink and enjoy,” he wrote on his blog. “Big data becomes even bigger and it won’t be just advertising you are susceptible to. Imagine the alcohol consumer identified as drinking too often and has their health premiums raised accordingly.”
Such warnings play into broader anxieties about the extent to which government agencies such as Peter Dutton’s Department of Home Affairs are acquiring broad new powers of surveillance – for example, warrantless access to the burgeoning national facial recognition database. Last month, The Daily Telegraph revealed that the government was weighing plans to give Dutton and Defence Minister Marise Payne the authority to approve spying on Australians by the Australian Signals Directorate, currently restricted to foreign operations, for the first time.
“The Department of Home Affairs is quite expansive; it’s arguably somewhat disrespectful of the law,” says Bruce Arnold, secretary of the Australian Privacy Foundation.
“ ‘If we can do it, we should be allowed to do it,’ ” Arnold says of the apparent attitude within the department. “ ‘If it’s administratively and bureaucratically convenient, we should be allowed to do it, indeed, we must be allowed to do that.’ And a range of stakeholders, left and right, have critiqued that.”
Lesh does not believe it’s far-fetched to envisage future scenarios in which either the government or businesses penalise individuals for how they spend their money.
“So for example, if you are someone who partakes in a lot of fast food, your bank might sell that information on to your health provider, who then charges you a higher premium for your health insurance,” he says. “Or alternately, if government has access to that information, they could look at your spending on health and decide to charge you a higher Medicare levy.”
In fact, the selling of information related to consumer spending habits, albeit in anonymised and aggregated form, is already a reality in the private sector.
Last month, The New Daily reported on how both Westpac and Commonwealth Bank sell de-identified data about their customers to third parties, such as businesses interested in measuring their market share. Under current privacy legislation, such data can be sold legally as it is not considered personal information.
“I imagine that for the average Aussie, there’s already so much money that gets spent on credit card, not just for the purposes of convenience but because a lot of people do live on credit as well, that you’d already have very rich profiles of spending habits,” says IT security expert Troy Hunt. “Certainly there are companies out there, particularly the likes of payday lenders, where their business model is based on being able to get to your credit history in order to figure out your risk profile.”
Then there are questions about whether institutions, public and private alike, are actually competent to keep data secure, even if they want to – something brought into sharp relief by the revelation earlier this month that Commonwealth Bank had lost the financial records of 12 million customers.
“We should be thinking of how payment data is being handled, rather than whether you are paying in gold coins or chickens or bitcoin,” says Arnold, who views mass data collection as “not necessarily offensive” in itself.
“The issue there comes back to the fundamental point: is the data being properly safeguarded? So can we trust you that there won’t be a data breach?”
Arguably, such privacy questions are already largely out of our hands. In March, the ABC ran a news article titled, “Is Australia on the brink of becoming a completely cashless society?” One economist quoted in the piece, Richard Holden at the University of New South Wales, predicted that we could be living cash-free as early as 2020. As Hunt points out, the biggest driver of the transition to the digital economy hasn’t been the government, but our own desire for convenience.
“I imagine we will see a point some time in the future where cash is simply something that’s not seen anymore,” he says. “Look, I don’t know if it’s 15 years or 20 years or 50 years, but at some point in time this will become a remnant of a bygone era. I think that perhaps the only question here is how long that might be.”
This article was first published in the print edition of The Saturday Paper on May 19, 2018 as "Cash cropped".
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