The Australian dollar (AUD) is the official currency of the Commonwealth of Australia. It is the fifth most traded currency in foreign exchange markets and is popular with investors for its proximity to Asian economies. Australia’s politics and economy are in general stable and predictable, and the foreign exchange markets are relatively free from government intervention, making the Australian dollar a popular choice for currency traders. Its nickname in foreign exchange circles is the “Aussie.”
The first known currency act in Australia was issued in 1800 as a proclamation defining the value of a variety of foreign coins already in circulation. Unfortunately, there was so little currency circulating in Australia at the time that rum was chosen as a de-facto currency by the early settlers. Coinage didn’t begin until 1813 when New South Wales began punching holes in Spanish silver dollars. The small middle part that was punched out was called the dump and the remaining ring from the original coin was called a holey dollar. The value of the holey dollar was set as five schillings, or one-quarter of a pound Sterling, while the dump was valued as one schilling and three pence which was equal to one-quarter of a holey dollar. This mutilation of the Spanish dollar was a scheme to keep the money in New South Wales and prevent it from being taken to other Australian states, where it would be worthless.
England adopted the gold standard in 1816 and the British Empire introduced Sterling coins to all of its colonies in 1825. This was a necessary action after Spain’s colonies in the New World won their independence. Latin America was the largest producer of Spanish dollars and independence had drastically reduced the minting of Spanish dollars, causing scarcity in the English colonies.
The Bank of New South Wales, established in 1817, was the first state bank in Australia. Paper banknotes denominated in pounds were being issued by private banks at this time. In 1852 Adelaide began issuing gold coins denominated in pounds. In 1855 the Sydney mint began to issue gold sovereigns at par with the pound Sterling, which were mostly produced for export to India. At this point British copper and silver coins, Australian gold sovereigns (with a value of one pound) and gold half-sovereigns, private bank notes and a mix of locally produced copper tokens used for small transactions all circulated freely in Australia.
Australia achieved autonomy as a Federation in 1901 and the government assumed the power to print currency. In the interest of imposing a national currency, it began over-printing bank notes in order to drive out private banks’ currency through outright devaluation. In 1910 the Australian Notes Act was passed, thus eliminating the circulation of State paper currency and leaving the central government as the sole authority for currency production and manipulation. The Australian pound was established as a national currency and fixed at par to the value of the pound Sterling. It was composed of 20 schillings which in turn was made up of twelve pence. This effectively put Australia on a gold standard due to the fact that England and her pound Sterling were on a gold standard.
The pound Sterling was removed from the gold standard at the outbreak of WWI in 1914, only to return in 1925 and caused massive deflation throughout countries linked to the English currency. By 1931 emergency economic measures were implemented in Australia that included removing the Australian pound from the gold standard and devaluing the currency.
In 1949 the United Kingdom devalued the pound Sterling and Australia was forced to devalue their own currency in an attempt to avoid loss of competitiveness in international markets due to an overvalued Australian pound. Both currencies lost 30 percent of their value against the US dollar.
After years of planning, Australia instituted a new decimal currency in 1966 denominated the Australian dollar. The exchange rate was set as $2 = £1. The Australian dollar is the current currency of Australia.
When the US closed the gold window in 1971 the gold price per ounce rate of the Australian dollar debuted at $50.28. Since then the Australian dollar has steadily lost value with the gold price in Australian dollars reaching a high of $1,806.08 in September 2011.
Bullion coins issued in Australia include:
- the gold sovereign and it’s half-ounce counterpart (1855)
- .925 fine sterling silver pence and schilling coins (1910)
- bronze pennies and half-pennies (1911)
- .500 fine sterling silver coins (1946)
Australia claims 79.9 tonnes of gold reserves, representing about 8.1% of its foreign reserves.
The Perth Mint is Australia’s oldest operating mint, founded in 1896 as a branch of the Royal Mint in London. Today it is owned by Gold Corporation which is under control of the government of West Australia. It currently produces a variety of bullion coins, the most popular being the gold and silver Kangaroos, Koalas and Nuggets.