The Reserve Bank’s paper The Future of Money – Stewardship is the first in a series planned as part of its consultation on the Future of Money. Below are a few notes and pointers from Positive Money that will help you to understand the issues and make your own submission. We’ll keep you posted on ours.


  • The Reserve Bank’s paper was written in easy-to-understand terms and was free of jargon.
  • An important assumption underpinning this paper is that New Zealanders value monetary sovereignty.  (There is a narrow definition of monetary sovereignty relating to central bank money and monetary policy – it does not appear to explicitly include private money).
  • There will be more detailed consultation papers in November.

From the Executive Summary

The paper mentions credible threats to the stability and functioning of the monetary system and that the Reserve Bank intends to take a proactive approach to ensure that New Zealanders get a modern, agile and forward-looking system.  It also says that they may need more powers if they are to fulfil their stewardship role.

Our comments on the key points in the paper

Review of the payments system (page 7)

There will be a high-level review of our payments system as the first step in taking a more active and deliberate role in promoting a fit-for-purpose payments system.

Private Money (page 8)

Private money (money created by private entities and is, in practice, a private ‘IOU’) forms part of our monetary system.

I take this to be an important announcement. In the past, they have talked about credit and fudged around the definition.  Unfortunately, they do not mention that private money:

  • is created out of thin air by private entities and lent out at interest.
  • forms approximately 97% of our money supply.  (This is important if the Reserve Bank is serious about ’monetary sovereignty‘)
  • is destroyed once the loan is repaid.  For our money supply to grow, more people must get into debt.

Private Money (page 9)

Box 2 mentions that cash is currently the only type of central bank money available to anyone. It goes on to say that cash is also the only physical money available in New Zealand and that all private money exists digitally (as an electronic record).

The profit imperative (page 14)

They (banks) may instead prefer to invest in payment methods that compete with cash (such as Visa- and Mastercard-branded bank-issued credit cards), as these appear to be significantly more profitable for banks. As a result, there are fewer bank-owned ATMs than there once were, fewer bank branches and reduced bank opening hours.

The cash paradox (page 14)

The paper states the while the amount of cash used for transactions is falling, the amount of ‘cash in circulation’ continues to grow.  This suggests that cash may be useful to people as a store of value. Cash in circulation increased by approximately $800 million as New Zealand entered its first COVID-19 lockdown in March 2020.

High fees (page 15)

This is consistent with the relatively high fees being charged to merchants who accept digital payments (in particular, small and medium-sized merchants incur high fees). There are few incentives for incumbents (banks) to adopt innovative solutions that, for example, better serve the needs of consumers or reduce the costs of cross-border payments.

Convertibility (page 17)

Cash is a value anchor for private money that can be swapped at a ratio of 1 to 1 whenever they want convertibility.  For example, $50 of private money can be converted into $50 cash at an ATM.  The paper states that this is something that “people take for granted”.  This should not come as a surprise because I consider that the majority of people believe that the Reserve Banks creates our digital cash.

Public good verse the profit imperative (page 18)

Public sector involvement or intervention in some capacity is typically required when benefits that have the characteristics of public goods are involved. That’s because private firms are motivated by profit and they cannot charge for benefits from which no one can be excluded. So, when private firms weigh up how much to invest or produce, public good benefits carry little weight. If the systems that give rise to public goods are heavily reliant on private entities and interests (as is the system that makes cash available, for example), public interventions in these systems are typically required.

Stewardship beyond central bank money (page 20)

Although the Reserve Bank’s statutory mandate is focused on the cash system, the reality is that the systems that underpin central bank money, private money and payment instruments are interconnected. This integrated network exists in a dynamic equilibrium, meaning that what happens in one part of the system can have intended or unintended consequences elsewhere, and may even potentially destabilise the whole system.

The Reserve Bank proposes to take a strategic and coordinated approach to money and cash issues.

Regional access to banking services (page 23)

If some people or businesses cannot get reliable access to banking services (at all, or on reasonable terms), or if banking services are not innovative or inclusive in meeting their needs, it is unlikely that the money and cash system will be working well for them or for New Zealand. Data shows that people in regional New Zealand are particularly vulnerable to these problems. Access to banking is also an issue in urban areas, with bank branches and ATMs being withdrawn from many urban communities, creating challenges for people to access face-to-face banking.

Steer and influence (page 25 Table 2)

The Reserve Bank will use suasion to prompt others to act in the public interest.

More from Positive Money on our Future of Money consultation page.

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