Hoarding of NZ$50 and NZ$100 notes seen in Sept/Oct crisis, says RBNZ

The Reserve Bank of New Zealand said in its latest RBNZ Bulletin that there had been an "unusual increase in issuance of NZ$50 and NZ$100 notes late in 2008, associated with public nervousness about the state of the financial sector." Issuance of the notes returned to normal levels after the deposit guarantee scheme was announced, RBNZ economists said. More currency is usually issued in the fourth quarter of each year due to the effects of Christmas, yet "the increase in demand for the higher denominations was unusually large in 2008," RBNZ economists Alan Boaden and Kristin Langwasser said in a paper titled 'Recent trends and developments in currency'. "(I)n the December quarter each year, more currency is issued than in other quarters. In October 2008, the crisis hitting financial markets was associated with an increased demand for cash as a store of value," Boaden and Langwasser said. "Although there has been an underlying growth trend for the last few years in issuance of the NZ$50 note due to the shift away from NZ$20 notes towards NZ$50 notes in ATMs, comparing the 2008 and 2007 December quarter figures shows what appears to be a jump relative to the trend," they said. "The issuance of higher denomination notes returned to normal levels shortly after the government announced the Retail Deposit Guarantee Scheme. This suggests that the public had regained some confidence." "However, repatriation data does not show a return of the "˜extra' NZ$50 and NZ$100 notes issued above normal levels in December quarter 2008. This could be partly due to a continuing adverse effect on confidence from the stream of bad news from overseas. It may also be the case, though, that the repatriation of these notes will happen gradually over a longer period."