For years, Australia’s march towards a cashless society appeared inevitable.

Debit cards replaced wallets full of banknotes. Smartphones became payment terminals. Tap-and-go evolved from a convenience into the default way millions of Australians paid for almost everything, from a morning coffee to the weekly grocery shop.

But new figures from the Reserve Bank of Australia (RBA) suggest something unexpected has happened.

After nearly two decades of almost uninterrupted decline, Australians are using cash slightly more often than they were just a few years ago. According to the RBA’s 2025 Consumer Payments Survey, around 15 per cent of all payments were made using cash in 2025, compared with 13 per cent in 2022—the first increase recorded since the survey began in 2007. Around half of Australians now use cash during a typical week, while three-quarters still keep some cash on hand.

At first glance, the numbers might suggest Australians are rediscovering a love of physical money.

That interpretation, however, is almost certainly too simplistic.

The reality is far more complicated—and potentially far more revealing about the pressures facing households and businesses across the country.

Cash remains vastly less common than it was two decades ago. In 2007, roughly seven out of every ten payments were made using notes and coins. Today that figure has fallen to around one in seven. Electronic payments continue to dominate everyday commerce, particularly online shopping and larger purchases. The recent increase represents a stabilisation rather than a wholesale reversal of Australia’s long-term digital payments transition.

Even so, economists and policymakers are paying close attention because payment behaviour often reflects broader economic conditions.

Periods of financial uncertainty frequently change the way consumers handle money. Some households become more cautious about spending, others prefer the certainty of budgeting with physical cash, while businesses facing rising costs may increasingly encourage customers to pay with notes rather than cards to avoid merchant service fees.

The Reserve Bank itself identifies several legitimate reasons Australians continue to hold cash. Many people keep it as a backup if electronic payment systems fail, while others value its usefulness during natural disasters, telecommunications outages or power failures. Around one-third of Australians say they would experience hardship or major inconvenience if cash became difficult to access.

These findings reinforce the federal government’s recent efforts to preserve Australia’s cash infrastructure, including policies aimed at ensuring Australians continue to have reasonable access to cash withdrawal services and that essential retailers continue accepting physical currency.

Yet the RBA’s data alone does not explain why cash usage has edged higher.

One explanation frequently cited by economists is the sharp increase in the cost of living experienced over the past several years. Inflation has significantly increased household expenses, while many small businesses continue to grapple with rising wages, insurance premiums, electricity prices and borrowing costs.

In that environment, avoiding transaction fees becomes more attractive.

Although card processing costs may appear relatively small on individual purchases, they can represent thousands of dollars annually for small businesses operating on narrow profit margins. Many cafés, restaurants, hairdressers, mechanics, plumbers and independent retailers now openly advertise discounts for customers willing to pay in cash.

Consumers facing tighter household budgets may also find cash useful as a spending control tool. Unlike digital payments, handing over physical money creates an immediate sense of expenditure that some financial advisers believe helps reduce impulse purchases.

The RBA survey supports this explanation. Budgeting remains one of the most commonly cited reasons Australians continue using cash, alongside concerns about privacy, security and ensuring payment options remain available if digital systems become unavailable.

Another factor attracting increasing attention is the growth of Australia’s informal economy.

Cash has long played a central role in transactions that occur outside formal reporting systems. While the overwhelming majority of Australians use cash entirely lawfully, tax authorities have repeatedly warned that undeclared cash payments remain a feature of some industries and occupations.

The Australian Taxation Office estimates the national GST gap—the difference between the GST theoretically owed and the amount actually collected—has increased in recent years, highlighting the continuing challenge posed by the shadow economy alongside genuine reporting errors and business failures.

Illicit tobacco also forms part of this discussion.

Australia’s exceptionally high tobacco excise has created one of the world’s most lucrative illegal tobacco markets. Law enforcement agencies have repeatedly linked organised crime groups to illegal cigarette imports, underground tobacco retailers and a series of violent attacks on tobacco shops across multiple states.

Cash remains the preferred payment method within many illegal markets because it leaves no electronic transaction trail, making enforcement considerably more difficult than transactions conducted through the regulated banking system.

That does not mean rising cash use automatically reflects criminal activity.

Most Australians withdrawing money from an ATM are doing so for entirely legitimate reasons.

However, economists note that cash demand often increases during periods of economic stress, elevated inflation or growing informal economic activity. These trends are not unique to Australia and have been observed internationally during previous episodes of financial uncertainty.

Another reason Australians may still value cash has little to do with spending habits and everything to do with resilience.

Recent natural disasters, cyber incidents and payment outages have reminded consumers that digital payment systems are not infallible. When telecommunications networks fail or electricity is disrupted, physical cash can quickly become the only functioning payment option. This resilience explains why emergency management agencies continue encouraging households to keep a modest amount of cash available for emergencies.

Despite the recent uptick, Australia remains overwhelmingly a digital payments economy. Debit cards account for the largest share of transactions, followed by credit cards and mobile wallets, with digital payment methods continuing to gain market share each year. The modest rebound in cash therefore represents a change in consumer behaviour rather than a reversal of the country’s long-term technological direction.

The Reserve Bank says another important finding is that cash continues to play a significant role across every demographic group. Older Australians and lower-income households generally use cash more frequently, but the 2025 Consumer Payments Survey found Australians of all ages still carry and occasionally spend physical money. Even among younger consumers who overwhelmingly favour digital payments, many reported keeping cash available for emergencies.

That distinction matters because the debate is no longer simply about convenience. Instead, policymakers are increasingly discussing resilience.

Australia has experienced several high-profile payment outages in recent years, ranging from telecommunications failures to banking disruptions that temporarily prevented electronic transactions. During such events, businesses capable of accepting cash were often able to continue operating while purely digital transactions became impossible.

For that reason, the federal government has argued that maintaining a functioning cash distribution network remains an important part of Australia’s financial infrastructure, even as digital payments continue expanding. Recent legislative reforms have been designed to preserve access to cash, particularly in regional communities and during emergencies, while ensuring consumers can still use notes and coins for essential purchases.

There is also a growing debate about who should bear the cost of keeping Australia’s cash system alive.

Maintaining ATMs, transporting banknotes, processing deposits and operating branch networks has become increasingly expensive as fewer people rely on cash for everyday transactions. Consumer advocates have argued that the financial burden should not fall solely on traditional banks that continue operating extensive branch networks while digital-only institutions benefit from reduced infrastructure costs.

For businesses, the calculation is equally complex.

Accepting cash involves security risks, insurance costs and the time required to count, store and deposit takings. Card payments eliminate many of those problems but introduce merchant service fees that reduce already narrow profit margins. For many small operators, neither option is ideal, leaving owners to balance customer convenience against operating costs.

That tension has become more pronounced as inflation and wage pressures continue affecting small business profitability. While inflation has eased from its peak, many enterprises are still dealing with elevated input costs compared with pre-pandemic levels, making every percentage point of transaction expense increasingly significant.

The shadow economy remains another important consideration.

Economists caution against assuming every cash transaction reflects tax avoidance or criminal conduct. Millions of Australians legitimately pay tradespeople, market stallholders, charities and community organisations with cash every day. Nevertheless, tax authorities acknowledge that undeclared cash income continues to represent a challenge across some sectors of the economy.

The Australian Taxation Office has reported that Australia’s GST gap—the difference between the amount theoretically payable and the amount actually collected—has widened in recent years. Although the gap reflects multiple factors, including insolvencies, reporting errors and fraud, the figures illustrate why regulators continue monitoring cash-intensive industries closely.

Australia’s illegal tobacco market has added another dimension to the debate.

Successive increases in tobacco excise have dramatically widened the price difference between legal and illicit cigarettes, creating a highly profitable black market. Law enforcement agencies have repeatedly linked organised crime groups to illegal tobacco distribution, with cash remaining the dominant payment method because of its anonymity. While this activity represents only one component of overall cash demand, analysts acknowledge it contributes to continued circulation of physical currency outside the formal economy.

The broader message emerging from the Reserve Bank’s research is that cash should not simply be viewed as old-fashioned technology struggling to survive in a digital age.

Instead, cash appears to function as an indicator of broader economic conditions. During periods of confidence and stable incomes, consumers generally embrace the speed and convenience of electronic payments. During periods of uncertainty, higher living costs and financial stress, many households and businesses rediscover practical reasons for using physical money.

That does not necessarily mean Australia is abandoning digital payments. On the contrary, electronic transactions remain the overwhelming majority of all payments made across the economy.

What the latest data does suggest is that economic pressure influences payment choices more than technological preference alone. Australians are not suddenly rejecting tap-and-go because they dislike modern banking. Many are making pragmatic decisions shaped by rising household costs, business expenses, emergency preparedness and changing financial circumstances.

Whether cash continues to recover over coming years will likely depend less on nostalgia than on the broader health of the Australian economy. If inflation continues easing, real household incomes improve and business cost pressures moderate, economists expect digital payments to strengthen further. Conversely, if financial pressures persist, cash may continue proving more resilient than many predicted only a few years ago.

For now, Australia’s payment landscape tells two stories at once. Digital technology continues transforming how Australians spend their money, while the quiet revival of cash serves as a reminder that economic confidence, affordability and financial resilience still shape consumer behaviour just as much as innovation does.