Reserve Bank notes are printed in London by Thomas de la Rue and Co. Ltd. In order to maintain the quality of the notes in use by the public and also to ensure that adequate stocks are available to meet day to day requirements, it is necessary for the Reserve Bank to order well ahead and to forecast likely needs. The average life of all notes except the two highest denominations is estimated at less than one year; for a £10 note it is estimated at 15 months, and for the £50 note, which has a restricted use, at about three years. As notes circulate and become dirty or worn, they are withdrawn from circulation, cancelled and destroyed, new ones being issued. In 1963 a total of over 60 million note forms were destroyed in keeping with the policy of maintaining a good quality issue.

Notes that are damaged – for example, by inadvertently including them in the laundry – are sent to the Reserve Bank which gives effect to the “promise to pay” as soon as the value of individual notes is established by painstaking examination. The Reserve Bank makes no charge for this service.

In ordering new notes to ensure that an adequate supply is always available to meet the public's needs, the Reserve Bank has several factors to consider, some of a short term, some of a long term nature. First, there are seasonal factors such as the Easter and Christmas holiday periods. In December 1962, for example, notes in circulation increased by £2 million following on an increase of almost £7 million in November, but fell by about £14 million in January 1963. Secondly, there are changes in basic economic conditions which, among other things, effect the note circulation. Changes in the total national income and in the levels of salaries and wages, and movements in prices greatly influence the value of notes in circulation. Finally, there are the longer term factors such as the growth of population, the number of cash transactions, and the holding of larger amounts as till money. In New Zealand it is doubtful whether hoarding, burying notes in the garden or under the floorboards is at all widespread although isolated instances crop up from time to time.

Most Reserve Bank notes are bought by the trading banks from the Reserve Bank for issue to their customers. Some notes are also issued by the encashment of Government cheques at the Reserve Bank. The process of issuing new notes and withdrawing older and dirty ones is virtually continuous. To cope with the large volume, the Reserve Bank uses special equipment such as note-counting machines.

Over the years the note circulation has increased substantially, especially during the First and Second World Wars. Since 1935 the weekly average of Reserve Bank notes in circulation (including notes in the hands of the trading banks) has increased as follows:

As a proportion of the total money supply, which comprises coin, notes in the hands of the public, and demand deposits at the Reserve Bank and the trading banks, the note circulation has remained remarkably constant over the last 30 years. In June 1930 it was equivalent to about 17 per cent of the total, and in June 1963 the corresponding figure was just over 17 per cent.

Absolutely, demand deposits at the trading banks are more important as money than the note circulation. In March 1963, for example, these deposits totalled nearly £272 million while the total value of notes issued was £84 million. Of this latter sum, the trading banks held about £17 million as till money.

Reserve Bank notes are legal tender in New Zealand up to any amount. Since 1938, however, notes have not been convertible into sterling. The reproduction of bank notes is, of course, a punishable offence in New Zealand but counterfeiting is, fortunately, conspicuous by its absence.

Prior to the introduction of the Finance Emergency Regulations in 1940, there had been no control over the export of New Zealand bank notes. These regulations enabled the Reserve Bank to restrict the outflow of notes, and in April 1940 the maximum amount in notes and coin that could be taken by overseas travellers without special authority was fixed at £10 (now 15) if proceeding direct to the United Kingdom, and £5 (now 7) if for other destinations. Since January 1949 only 10s. and £1 notes may be exported.

The importation of money into New Zealand is not limited, but the notes of other countries do not circulate.

It is planned that new notes, with different designs, will be introduced in 1967, at the same time as decimal coinage.

by Robert John Familton, M.COM., Economist, Reserve Bank, Wellington.

• Appendices to the Journals of the House of Representatives, B.3, 1959, “Report of the Decimal Coinage Committee, 1959”
• Bulletin (monthly), Reserve Bank of New Zealand
• Money and Banking in New Zealand, Reserve Bank of New Zealand (1963)
• Overseas Trade and Finance, Reserve Bank of New Zealand (1960)
• British Commonwealth Coinage, Linear, H.W.B. (1959)
• Numismatic History of New Zealand, Sutherland, A. (1941).