The Australian dollar

Who has the power to issue Australian money

Section 51(xii) of the Constitution gives the Commonwealth Parliament power over currency, coinage and legal tender. Two statutes carry it. Section 36(1) of the Reserve Bank Act 1959 makes the notes legal tender with no limit on the amount. Section 16 of the Currency Act 1965 does the same for coins, but caps each: five-cent to fifty-cent pieces in any mix settle debts of up to $5, a $1 coin up to $10 and a $2 coin up to $20.

The Royal Australian Mint in Canberra has struck the coins since it opened in 1965. Note Printing Australia, a wholly owned subsidiary of the Reserve Bank, prints the notes and also sells notes or the polymer substrate to other central banks, Papua New Guinea and Vietnam among them. The Reserve Bank's position is that legal tender status does not stop a business from setting terms that require payment by card.

How the pound turned into the dollar

Before Federation in 1901 the six colonies ran separate currencies modelled on sterling. The Australian pound followed in 1910, at par with the British pound and divided the British way into 20 shillings of 12 pence each.

Decimal coinage was proposed decades before it arrived. A royal commission into banking, set up in 1935, recommended in 1937 a system based on dividing the pound into 1,000 parts. The Decimal Currency Committee appointed in February 1959 reported in favour in August 1960, and in 1963 the government fixed the changeover for February 1966, with the new unit worth ten shillings and its cent worth 1.2 pence.

Choosing a name took longer. More than 1,000 suggestions came in, cut to a shortlist of seven. In June 1963 the government announced the royal; public disapproval followed, and three months later the choice became the dollar. On Monday 14 February 1966, the day the press called C-Day, a sum of nine pounds, sixteen shillings and sixpence became $19.65.

Why three Pacific states use it

Kiribati, Nauru and Tuvalu are independent and use Australian notes and coins as legal tender. Nauru never had a currency of its own. Kiribati and Tuvalu each issued a dollar at par with the Australian one, legal tender at home but not in Australia; neither has minted coins since the 1990s and neither has ever printed a banknote. Norfolk Island is an Australian external territory and uses the dollar as part of Australia.

Papua New Guinea used the Australian dollar until 31 December 1975, when the kina replaced it, and Solomon Islands used it until 1977. In 2014, while Zimbabwe ran on foreign money, its central bank let customers open accounts in Australian dollars, though the cash itself was not yet circulating there.

What replaced the paper notes

The first decimal notes of 1966 were paper: $1, $2, $10 and $20, each matching an old pound note in value. A $5 note came in 1967, a $50 in 1973 and a $100 in 1984. Coins took over the two lowest values, the $1 in 1984 and a smaller $2 in 1988.

Counterfeit $10 notes turned up soon after the changeover. The Reserve Bank answered by developing new note technology with the Commonwealth Scientific and Industrial Research Organisation, and in 1988 it issued a polymer $10 note for the bicentenary of European settlement. A full polymer series followed from 1992. On 27 September 2012 the bank ordered work on an upgraded series with tactile features for people with impaired sight. Every earlier note remains legal tender.

How cash payments get rounded

The one-cent and two-cent coins stopped in 1991 and left circulation in 1992. Since then cash totals have been rounded to the nearest five cents, although the withdrawn coins can still pay a debt of up to 20 cents. The 1966 fifty-cent piece was 80% silver and stopped being minted after March 1968, once the silver in it was worth more than its face value. Australians call the aluminium bronze $1 and $2 coins gold coins.