OTTAWA — Killing the lowly penny was a painless, revenue-neutral adventure for New Zealand, according to a finance official from that country.
The Kiwis cut out their one- and two-cent coins in 1989. It was such a popular move, they scrapped the nickel, too, in 2006.
Alan Boaden, who heads New Zealand’s Reserve Bank currency department, spoke at the Senate’s national finance committee Wednesday by videoconference.
“The one- and two-cent coins had lost their value and no longer had any effective purchasing power,” Boaden said, adding that, as in Canada, the coins had become more costly to produce than they were worth.
“So it was a relatively straight-forward exercise” to withdraw them, he said.
The committee has been studying the fate of the now plated copper coin since last spring, and is expected to report its findings to Finance Minister Jim Flaherty in the next few months.
The Canadian penny costs 1.5 cents to produce, and Flaherty himself has conceded that doesn’t make any sense and the coin’s days are numbered.
Even coin collectors agreed Wednesday the penny isn’t useful as currency anymore.
The managing editor of the Canadian Coin News and the Ottawa-area director of the Royal Canadian Numismatic (coin collecting) Association also testified at committee Wednesday.
The only caveat for collectors is that the penny keep its legal tender status for interest.
Indeed, Canada’s 50-cent coin is still legal tender, as are the $1 and $2 bills.
The NDP’s Pat Martin, who has introduced a private member’s bill to scrap the penny, is hopeful the Senate committee’s study of its fate marks the beginning of the end for the worthless coin.
“The jig is up for the lowly penny,” Martin said. “They cost more to make than they’re worth, they’re a nuisance, and they have no commercial value.
“Three strikes and you’re out.”
The one-cent coin was introduced in 1908, but it has lost 98% of its purchasing power since then.
There are currently about 30 billion Canadian pennies in circulation, but the Royal Canadian Mint has to make about 500 million new ones every year because so many are thrown in fountains, lost in couches or hoarded in piggy banks.
Lined up flat side by side, there are enough Canadian pennies in circulation to go around the world more than 12 times.
A 2007 Wilfred Laurier University study found using the penny costs the Canadian economy more than $100 million a year in lost productivity counting it, rolling it, waiting in line while other people count them, and so on.
And Bank of Canada officials have said no one should worry about price hikes if the penny dies because prices wouldn’t change.
Rounding up or down to the nearest nickel would only apply at the final sale – which could include many items — and also would only apply to cash purchases.
Credit card and debit transactions would not be rounded because pennies don’t physically exist in credit or debit transactions anyway.
Prices in New Zealand are still marked in one-cent increments, Boaden said, and market forces have kept prices low and encourage retailers to be fair in their rounding policy.
Sweden scrapped its two lowest-denomination coins in the early 1970s.
Australia also dropped its one- and two-cent coins from circulation in 1992, and is currently considering dropping its nickel as well.
Source: http://cnews.canoe.ca/CNEWS/Politics/20 ... newscanada
