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Questions and Answers about the New Coins
The following questions are frequently asked about the new coins. Click on a question to go to the answer or scroll down the page to read all the questions and answers.
When will the new coins be introduced?
The new 10, 20 and 50 cent coins will be introduced on 31 July 2006.
There will be a transition period of three months, from 31 July 2006 to 31 October 2006. During this period the existing and the new coins can be used.
From 1 November 2006 the current 50, 20 & 10 cent coins, including the 5 cent coin will no longer be legal tender, which means that retailers do not have to accept them for payment of goods. The Reserve Bank will always redeem the existing coins.
When will the new coins be available?
The Reserve Bank won't be selling coins directly to the public, but the new 10, 20 and 50 cent coins will be available at retail banks from 31 July 2006.
New Zealand Post in conjunction with the Reserve Bank of New Zealand will be releasing a limited edition set of the new regular uncirculated coins along with the old coins which are to be discontinued. All coins are beautifully presented in an attractive card display and coins are carefully protected in plastic blister mounts. This pack is available at the special price of $9.90.
These can be pre-ordered now through NZ Post.
Why did the Reserve Bank decide to make the coins smaller?
By international standards, our current 20 and 50 cent coins are extremely large. The 50 cent coin, at 31.75mm in diameter and weighing 13.61gm, is one of the largest circulating coins in the world. It is, for example, 75% heavier than the Euro 50 cent coin. Their large sizes are a legacy of pre-decimal currency days. The 20 and 50 cent coins were left large to match the old half-crown and florin. At the time, people thought they would be accepted more easily.
Given their buying power nowadays, the 20 and 50 cent coins are inconvenient in people's purses and pockets. Moving them in bulk is tiring for cash handling staff. Security companies said that smaller, lighter coins would bring significant benefits in terms of ease of handling and OSH issues. Smaller 20 and 50 cent coins will be easier to store and use. The 10 cent coin needs to be smaller too, so people can tell the difference.
In a survey commissioned by the Reserve Bank, 51 per cent of respondents favoured smaller "silver" coins. When told that it would mean savings for the taxpayer, this figure went up to 66 per cent. Twenty eight per cent opposed the proposal, and 6 per cent had no opinion. Six out of ten people said they store coins rather than using them because they are too bulky and heavy. The summary of findings and full survey report (PDF 879KB) are available.
Why will the coins be made of plated steel?
Our existing "silver" coins are made of cupro-nickel (75 per cent copper and 25 per cent nickel). Nickel is expensive, and prices for these metals are volatile. For example, the price of copper has risen by 75% over the last twelve months. In recent years plated steel technology has matured, using either nickel to give a silver appearance, or copper to give a reddish appearance. Many countries now use plated steel coins, including the new euro 1, 2 and 5 cent coins, and coins issued in the UK, Canada and South Africa. Plated steel coins are more economical. Nickel-plated steel coins cost about 25 per cent less than cupro-nickel coins of the same size. Copper-plated steel coins are about 33 per cent cheaper than their cupro-nickel equivalents.
Plated steel coins will look and feel much the same as our existing coins, but they will be lighter. They last almost as long as cupro-nickel coins. Smaller coins in plated steel will be considerably lighter than our existing coins. A bag of new coins will weigh less than half that of the equivalent bag of current coins. In the year to 30 June 2004, it cost the Reserve Bank $3.5 million to issue new 5, 10, 20 and 50 cent coins. Downsizing and changing to plated steel will save the taxpayer annually about $3 million.
Will my current coins lose their value?
The Reserve Bank will always redeem the face value of the current coins.
However, three months after the introduction of the new coins the Bank will "demonetise" the current coins, i.e. declare that they are no longer legal tender. This means that shops will no longer need to accept them as payment for goods or services - and customers need no longer accept them as change in transactions.
Why will the Bank "demonetise" the current coins?
It is important that the old coins be demonetised and withdrawn from circulation for several reasons:
• Banks, shops and other large cash-handlers would face considerable staff costs in handling and sorting two sets of coins on an indefinite basis.
• Many bulk coin handling and sorting machines would not be able to process the higher number of coin sizes. Coin weighing machines would be rendered ineffective.
• Businesses operating vending machines, including parking meters, would like to see a fast changeover so that they can quickly convert their machines to accept the new coins.
• Many of the general public would probably find it confusing and annoying having coins of two different sizes for some denominations.
Demonetising is a normal procedure following a currency change. In the recent past the Bank has demonetised one and two cent coins and one and two dollar notes.
What should I do with my current coins?
People should continue to use current coins as they normally do until 31 July 2006.
The Reserve Bank is encouraging people to locate any 5, 10, 20 or 50 cent coins that they may have stored away and take them to their bank. By locating these coins now and taking them to your bank, you'll be beating the rush, and saving yourself a job later in the year.
From 31 July 2006 - 31 October 2006 banks and shops will continue to accept the current coins but will start to issue the new coins as change for transactions. The experience of European countries with the introduction of the Euro suggests that most of the older coins will be withdrawn from circulation in four or five weeks.
Will the general public and those in cash handling jobs be able to distinguish the new coins easily?
The Reserve Bank is confident that the general public and those who handle cash at work will have few difficulties in distinguishing the coins. The copper colour of the 10 cent coin will make it very easy to distinguish from the "silver coloured" 20 and 50 cent coins. The new 20 cent coin will be 3mm smaller in diameter than the 50 cent coin. This is about the same difference as at present - and in proportionate terms is greater. The one and two dollar coins will be significantly heavier and of a different colour to the new 10, 20 and 50 cent coins. Of course, the different images on the coins will be the easiest method for most people to distinguish them.
Will blind and visually impaired people be able to distinguish the new coins?
Bank staff consulted the Royal New Zealand Foundation of the Blind and the Association of Blind Citizens of New Zealand. Representatives of both organisations expressed support for the new coins. They said that having plain edges on the 10 and 50 cent coins and the "Spanish flower" edging on the 20 cent coin would give the new coins "a whole new feel". It would be easy for the blind and visually impaired to differentiate them from the current coins in the transition phase. It could achieve the ideal outcome whereby blind people would not need to compare coins but would be able to identify any coin by simply holding it alone.
How will this affect the coin vending industry?
Operators of coin counting, sorting and vending machines will need to recalibrate their machines, buy replacement parts or replace their machines. Adjustments required will vary from a 15 second reprogramming job that would be done as part of regular maintenance for some modern machines to full replacement for some older machines.
The Reserve Bank proposes to assist those in coin-handling businesses by:
• providing sample coins for testing;
• distributing new coins where needed in New Zealand prior to the first issue day; and
• facilitating the return of old coins to main centres.
Can retailers and other businesses decline to accept payment in old coins once those coins are demonetised?
The Reserve Bank has received an opinion from the Crown Law Office on this question. This opinion indicates that if a business displays a sign stating that payment for goods or services must be made in specified coins then this forms part of the contract of sale offered. In that case the business is entitled to decline payment in other coins. However, if no explicit terms of sale, apart from the price, are displayed then a business is obliged to accept payment in any coins or any other forms of legal tender.*
In the particular case of coin-operated vending machines, it is either an explicit or implicit condition of sale that payment must be made with coins that the machine accepts. There are many machines in New Zealand now that only accept a limited range of coins. Provided the vendor clearly indicates which coins may be used then they have the right to refuse payment in other coins. The onus lies with the customer to offer payment in the required coinage.
Generally, of course, retailers can be expected to be willing to accept payment with the old coins as long as they are legal tender. They will not be demonetised until 1 November. The Reserve Bank will always pay face value for the old coins even after they are demonetised.
* Note that Section 27 of the Reserve Bank Act states that one and two dollar coins do not represent legal tender as the only means of payment for amounts greater than $100 and lower value coins do not represent legal tender as the only payment for amounts greater than $5.
Why did the Bank decide to withdraw the five cent coin?
The main reason is that over the years inflation has reduced the value of the 5 cent coin so much that it is now just a nuisance and of no real value in terms of people making transactions. A 5 cent coin is now worth less than half what a cent was worth back in 1967 when we switched to decimal currency. In addition, people use Eftpos more. Removing the 5 cent coin would only affect cash transactions and only the total when buying more than one item.
The Reserve Bank issues about 30 million 5 cent coins a year at a cost of just over $1 million. Yet they don't circulate. Shops give them to the public as change, and then they are stored in jars at home, are lost or are thrown away.
A survey commissioned by the Reserve Bank indicated that the general public and retailers are of the same view. Of those surveyed, 68 per cent of the general public favoured dropping the 5 cent coin, 28 per cent favoured keeping it, and 4 per cent were undecided. The main reason cited for withdrawal was that the coin has no value and is a nuisance. Indeed, those surveyed had difficulty remembering what they do with 5 cent coins, saying they "just get lost", or "just pile up", or "sit in drawers". A minority said that they throw them away.
Among small retailers, 70 per cent were in favour of discarding the 5 cent coin, while 30 per cent were against. Of large retailers, 40 per cent were in favour, 41 per cent were neutral and 19 per cent opposed. Those in favour said 5 cent coins are a hassle to deal with, and without them there would be less work and cost in sorting their takings. The summary of findings and full survey report (PDF 879KB) are available.
Will the withdrawal of the five cent coin cause prices to rise?
The Bank is confident that competition will restrain price increases. Some prices might rise, others fall and others stay the same - as many do on a regular basis already. The overall impact on inflation is likely to be negligible. The Consumers Institute undertook a survey after the 1 and 2 cent coins were removed and found that prices actually fell slightly.
The AC Nielsen surveys of small and large retailers found that if the 5 cent coin was removed then, for prices ending in five cents, as many retailers would round down as would round up. Of course, rounding is only applied to the total value of all transactions - and only for cash transactions. The summary of findings and full survey report (PDF 879KB) are available.
The increasing use of eftpos makes the issue of rounding less important. Electronic transfers are used for 85% to 90% of transactions at some supermarkets. In 1987, by contrast, 60% to 70% of transactions were made in cash and the other 30% to 40% were made by cheque. Credit cards were not generally accepted then.
The Bank's Economics Department has undertaken some analysis of the potential impact of the removal of the five cent coin. This work concluded that the effect on prices faced by most households would be negligible. Statistics New Zealand checked this analysis and confirmed that it was sound.
Why do other countries have very low denomination coins?
Countries with low value coins generally have state and local consumption taxes which are added to the advertised prices of goods and services. Consequently, almost every cash transaction requires the exchange of very low denomination coins. In New Zealand, GST is almost always incorporated in the displayed price of products. Also, the use of electronic methods of making payments is more common in New Zealand than in most other countries.
Low denomination coins are unpopular in several developed countries. Finland has chosen not to issue 1 and 2 eurocent coins. Major retail organisations, banks and consumer organisations in the Netherlands have voluntarily agreed that all pricing should be in 5 eurocent intervals. A recent survey in the United Kingdom indicated that about 5 million people there regularly throw away low value coins. If Europe and the UK opted for lowest value coins of five eurocents and five pennies respectively these would be of similar value to a New Zealand 10 cent coin.
What was the result of the public consultations?
The Bank received 2,050 submissions. These comprised 456 email messages, 124 individual letters, 186 submissions from school students (mainly from classes of primary school pupils) and 1,284 form letters (photocopied letters distributed by a third party). Bank staff read and replied to all of them.
The main purpose of the Bank's public consultations was to test its proposals through public scrutiny and to find out if any important issues had been overlooked. The Bank was pleased to find that no major surprises emerged from public submissions. Bank staff had already considered all serious suggestions made and were already aware of the main issues raised as concerns.
The Bank contracted AC Nielsen to analyse the feedback received from the general public. AC Nielsen's report including the summary of submissions from private individuals and Proposed Changes to Silver Coinage - Analysis of Public Submissions (PDF 207KB) are available.
Why were the one and two dollar coins not changed?
The one and two dollar coins were not included in this review for several reasons.
• They are comparatively new coins, having been introduced in 1991.
• They are not overly large like the current 20 and 50 cent coins.
• They appear to circulate well rather than be hoarded or lost like the lower value coins.
• We would need to withdraw all the current one and two dollar coins if we introduced plated steel substitutes. This would impose large costs on operators of the many machines that only take one and two dollar coins.
• These coins are made from a copper-aluminium alloy which is not much more expensive than plated steel. As a result there would not be substantial savings to be made from changing them.
Why did the Reserve Bank leave the designs unchanged?
The main goal of this project is to modernise New Zealand's "silver" coloured coins so that they meet the needs of businesses and the general public more effectively. Leaving the designs unchanged makes the new coins readily identifiable and reduces transition costs.
Also, to have considered new designs would have generated considerable public debate and would have diverted resources from more important priorities. The Reserve Bank might review the images on the coins at some future date but this was not considered in the current project.
Did the Reserve Bank consider introducing a 25 cent coin?
The suggestion of introducing a 25 cent coin has been considered on a number of occasions without a great deal of support. A 1987 Treasury report concluded that a 25 cent denomination is inappropriate in a basic 10 cent system. A public opinion survey in 1994 showed a mixed response but the majority of people were opposed.
In addition, the assumption that replacing the 50 and 20 cent coins with a 25 cent coin will reduce the number of coins in use is a fallacy. A 25 cent coin in conjunction with a 5 cent coin means extra coins are needed in change (e.g. 5 coins as against 3 for change of 90 cents). In 1994 the Association of Retail Grocers commented that their research had shown that introducing a 25 cent coin would increase the total amount of coinage required in each cash register by as much as 23%. At this stage the introduction of a 25 cent coin is not under consideration by the Bank.
Did the Reserve bank consider introducing a five dollar coin?
The suggestion of introducing a five dollar coin has been considered in the past. However, experience in New Zealand and overseas indicates that when a note and a coin of the same value circulate together then people show a strong preference for the note.
Notes have the additional advantage of being more secure. It is easier to build security features into them. Also, the use of polymer rather than paper for notes makes them more durable and cost effective. It is possible that one day we will introduce a five dollar coin but it is not being actively considered at the moment.
Did the Reserve Bank consider introducing irregular shaped coins to assist identification?
It is true that having one or more non-circular coins would assist in differentiation. However, it is very difficult for vending machines to handle coins with an irregular shape. Businesses and private individuals use vending machines for a wide variety of purposes, including the purchase of food and drink, parking space and giving change. It is necessary to have circular coins to ensure the continued effective operation of these services.
How will rounding work?
The New Zealand Retailers Association has recommended to its members that when the total transaction value ends in x cents and payment is by cash then the following rounding principle should be applied:
The Association has stressed that this is a suggestion only and each company will form its own commercial decision on the matter of rounding. However, the Association has added that where rounding is used then the policy should be clearly displayed at point of sale so consumers are appropriately informed.
What are the magnetic properties of the new coins?
All the metals used in the new coins are magnetic apart from the copper plating. The magnetic materials used are called "soft magnetic", that means they do not hold a magnetic field once a magnetising force has been removed and will not have any affect on credit card magnetic strips in peoples wallets. In technical terms this gives them a very low "Remanence" and "Retentivity" figure with a very narrow "Hysteresis" loop.