Currency history - history of Australian dollar

The first officially circulated form of currency was introduced in Australia in the early 1800s - the Holey Dollar and the Dump. These coins were created to resolve the coinage scarcity in the Australian colony of New South Wales. Such was the need for coins that Governor Lachlan Macquarie contributed his personal Spanish dollar collection, which was remodelled into two coins by punching out the centre of the coin: the inner coin or Dump was valued at 15 pence, and the outer Holey Dollar was valued at 5 shillings. By 1813, both designs had Australian currency references such as 'five shillings' stamped on to their surfaces. In 1852, the Government Assay Office issued gold pound coins and sovereigns that were minted by the Sydney and Melbourne mints.

The Commonwealth of Australia was established in 1901 when the British combined the colonies of Tasmania, South Australia, Victoria, Queensland and New South Wales with Western Australia. As a result, the currency adopted by The Commonwealth of Australia comprised of British gold, silver and bronze coins in addition to notes issued by the various national Australian banks. The Queensland Treasury also printed notes, although these were restricted to use in Queensland.

In 1909, the wealth Constitution took control of the Australian currency through the Coinage Act, followed by the Australian Notes Act in 1910. Two years later, the Labour Government of Prime Minister Andrew Fisher prohibited the circulation of State notes and introduced a national currency called the Australian pound, which lead to the printing of the first ever Australian Pound notes. The Australian Pound's value was fixed to the British Pound Sterling and as a result, fluctuations in the British Pound Sterling greatly affected the Australian economy.

After years of planning, the Australian dollar was finally introduced on February 14, 1966 as the new decimal currency. All coins portray Queen Elizabeth II on the obverse and are produced by the Royal Australian Mint.
In 1967 the Australian dollar effectively left sterling for the first time. When sterling devalued in 67 against the USA dollar, the new Australian dollar did not follow. It maintained its peg to the USA dollar at the same rate. For much of its history, Australia maintained a peg to the British pound reflecting historical ties as well as views about the stability of the British pound. From 46 to 71 Australia maintained a peg to the USA dollar under the Bretton Woods system, but it was effectively pegged to sterling until 67. With the breakdown of the Bretton Woods system in 71, Australia converted the mostly fixed peg to a moving peg against the USA dollar. In September 74 Australia moved to a peg against a basket of currencies called the TWI, trade weighted index, in an effort to reduce fluctuations associated with its dollar. The peg to the TWI was changed to a moving peg in November 76, causing the actual value of the peg to be periodically adjusted. In December 83, the Australian Labor government led by Prime Minister Bob Hawke and Treasurer Paul Keating "floated" the Australian dollar. From that point movements in the Australian dollar continued to reflect the strength of its terms of trade.

The Reserve Bank of Australia (RBA) is responsible for formulating and implementing monetary policy. The Board's obligations with respect to monetary policy are laid out in the Reserve Bank Act. Section 10(2) of the Act, referred to as the Bank's 'charter', says: "It is the duty of the Reserve Bank Board, within the limits of its powers, to ensure the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank ... are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to: (a) the stability of the currency of Australia; (b) the maintenance of full employment in Australia; and (c) the economic prosperity and welfare of the people of Australia."

Since 1993, these objectives have found practical expression in a target for consumer price inflation, of 2-3 per cent per annum. Monetary policy aims to achieve this over the medium term and, subject to that, to encourage the strong and sustainable growth in the economy. Controlling inflation preserves the value of money. In the long run, this is the principal way in which monetary policy can help to form a sound basis for long-term growth in the economy.
Australian dollar is in the top six of Most traded currencies. The other currencies in this prestigious top are United States dollar USD $, Eurozone euro EUR €, Japanese yen JPY ¥, British pound sterling GBP £ and Swiss franc CHF.