Soaring metal prices mean it will cost more than the face value of the coins to make five cent, 10 cent and 20 cent pieces, according to new research.
Prices of the two key metals in Australia’s silver coins, nickel and copper, have skyrocketed this year due to Russia’s invasion of Ukraine, with the price of nickel spiking 250% on the London Metals Exchange last month to more than US$100,000 a tonne.
Investment bank Goldman Sachs predicts copper prices, which also spiked last month, are set to rise again as stocks of the metal run out.
In research released this week, analysts at Morningstar said the metal in a five cent piece was now worth 6c, up from 4c six months ago.
Over the same period, the value of metal in a 10 cent piece has increased from 9c to 14c, while metal making up a 20 cent piece has jumped in value to 28c from 18c.
However, the 50 cent and higher denominations continue to have a higher face value than their metal content. There is 38c worth of metal in the dodecagonal coin today, against 25c six months ago, while the metal value of each of the $1 and $2 coin remains below 10c.
The higher metal prices will eat into the Royal Australian Mint’s profit from making coins, which is known as seigniorage.
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Seigniorage returned to the commonwealth was $45.3m in the 2020-21 financial year, well above the Mint’s target of $19.9m – a result which the Mint said in its annual report was due to government financial support during the pandemic, “which saw an increase in the availability of cash within the economy and a corresponding demand for coin”.
The impact of soaring metal prices on the Mint will not be immediate because it has a stockpile of metal.
However, the Mint’s chief executive, Leigh Gordon, told Morningstar that the five cent piece was already costing more to produce than it generated in revenue and more coins could follow suit.
“At the moment, we’re thinking, particularly the five, 10 and 20 cent pieces could be specific coins where we are not recovering the money that it’s costing us to make them,” he said.
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The cost of the five cent coin has long been a hot political topic, with Guardian Australia contributor Malcolm Farr grilling Scott Morrison, who was treasurer at the time, about it as long ago as 2016.
“Why haven’t you abolished the five cent coin?” Farr asked during a post-budget National Press Club event.
“It has lost its utility in a cashless marketplace. It’s a nuisance and it costs 6c to make a five cent coin.”
Morrison was unimpressed with the question.
“Well Mal, if you can get as many people in this room again who are interested in that topic, I’ll answer your question,” he said.
“I mean, I’ll take it up with the Reserve Bank governor, Mal. Why don’t we get some questions on the budget.”
