Why prices will rise if five-cent coin is scrapped
Consumers will foot the bill for changes to Australian currency, with prices tipped to rise if the five-cent coin is abolished.
That's the prediction of Australian Retailers Association executive director Russell Zimmerman, who warns prices will be rounded up if the coin meets its rumoured demise.
"The big issue will be around smaller products that sell for less than a dollar," he says.
"Retailers won't sell a 95-cent item for 90 cents. Prices will be rounded up to the nearest dollar.
"That's where the effect will be on retail."
Rumours about the possible death of the five-cent coin gained traction in October, when Prime Minister Malcolm Turnbull agreed that the coin's growing irrelevance was "a fair point".
More than 21 million five-cent coins were minted last year, down from a peak of 306 million in 2006.
Fluctuating metal prices means each five-cent coin can cost up to 7c to produce.
The five-cent coin has been Australia's smallest denomination coin since one-cent and two-cent coins were withdrawn from circulation in 1992.
"When the one and two-cent pieces were being phased out, suppliers to a major department store were recommending prices at 99 cents," Zimmerman says.
"The argument then was that if the one cent-piece went, if you sold 100,000 items and you lost 100,000 one-cent pieces, you were losing quite a lot of money.
"That's where there will be a push up in prices."
Small convenience stores and their customers would be most affected by price changes, he says.
With five-cent coins not accepted by most parking meters and other coin-operated machines, many have been relegated to money boxes, tip jars and charity collections.
"The growth of cashless payments has reduced the overall demand of the five-cent piece; however any transition to its removal may affect other areas, including donations for charities," Ross MacDiarmid, chief executive officer of the Royal Australian Mint, told Money.
Zimmerman says Australia is better prepared than ever to lose the five-cent coin from its line-up as more consumers adopt cashless technology.
"It is going to happen one day, but the longer it's held off the less a problem it will be because of the increase in Tap and Go products," he says.