Australian dollar

The **Australian dollar** is the official currency of Australia and is divided into 100 cents. Introduced on 14 February 1966 to replace the Australian pound, it is issued in banknote form by the Reserve Bank of Australia and in coin form under Commonwealth currency legislation. Since December 1983, its external value has been determined in foreign-exchange markets.^[1][2]

Overview

The Australian dollar is the unit of account used for prices, contracts, wages, deposits, loans, government payments and securities denominated in Australian currency. In international usage it is identified by the ISO code **AUD**. In domestic settings the dollar sign is usually sufficient, while A$ or AU$ may be used where a distinction from other dollar currencies is required.

The currency is central to Australia’s monetary and payments system. Banknotes are issued by the Reserve Bank of Australia (RBA), which is Australia’s central bank and has responsibility for issuing, reissuing and cancelling Australian banknotes.^[3] Coins are made and issued under the framework of the Currency Act 1965 and associated determinations, with circulating coins produced by the Royal Australian Mint.^[4][5]

The Australian dollar also functions as an internationally traded currency. In the 2025 Triennial Central Bank Survey coordinated by the Bank for International Settlements, the RBA reported that the Australian dollar was the seventh most traded currency globally and accounted for about 6 per cent of global foreign-exchange turnover.^[6] This international role reflects Australia’s open capital account, developed financial markets and links to commodity trade, but it does not make the Australian dollar a reserve currency on the scale of the U.S. dollar or euro.

Decimal currency and introduction in 1966

Australia adopted decimal currency on **14 February 1966**, replacing the pre-decimal Australian pound system. The changeover created a dollar divided into 100 cents, simplifying calculations compared with the pounds, shillings and pence structure that preceded it. The RBA’s historical material records that Australia issued its first decimal banknotes in 1966, initially in $1, $2, $10 and $20 denominations, with a $5 note following in 1967.^[1]

The 1966 changeover was more than a redesign of notes and coins. It established the monetary units used in most modern Australian financial documents. Legislation and administrative arrangements were needed to convert amounts, supply cash to banks and businesses, and educate the public. The RBA’s 1966 annual report noted that dollar notes equivalent to the prior £.s.d. notes were issued to the public on the changeover date.^[7]

The Australian dollar’s creation occurred during a period in which Australia still maintained a managed exchange-rate system. The domestic currency was not yet freely floating; instead, exchange-rate arrangements moved through several regimes before the float of December 1983. As a result, the early Australian dollar combined a modern decimal domestic structure with exchange-rate management characteristic of the post-war financial order.

Issuance and institutions

The Reserve Bank of Australia is responsible for Australian banknotes. Its role includes the design, production and issuance of banknotes, as well as ensuring that banknotes remain a secure and reliable means of payment and store of value.^[3] The RBA works with Note Printing Australia Limited, a wholly owned RBA subsidiary, in the production of banknotes.^[8]

Coins are separate from banknotes in both physical production and legal framework. The Royal Australian Mint states that it is responsible for producing Australia’s circulating coinage, and the Mint’s materials identify the normal circulating designs as the echidna on the 5 cent coin, lyrebird on the 10 cent coin, platypus on the 20 cent coin, coat of arms on the 50 cent coin, kangaroo on the $1 coin and an Aboriginal elder on the $2 coin.^[5] The Currency Act 1965 and related instruments provide the legal basis for Australian coins and their specifications.^[4]

The distinction between banknotes and coins matters for monetary administration. Banknotes are liabilities of the central bank, while coins are issued under Commonwealth currency arrangements. In everyday use, both are cash denominated in Australian dollars and circulate alongside electronic money in bank deposits and payment systems.

Banknotes

Australia currently has five banknote denominations: **$5, $10, $20, $50 and $100**. The RBA’s educational material states that more than two billion banknotes are on issue, with a total value exceeding $100 billion.^[9] Banknotes are used both for transactions and as a store of value, although electronic payments account for a large share of day-to-day payments in Australia.

Australia is notable for its use of polymer banknotes. The RBA records that the first Australian polymer banknote was a commemorative $10 note issued in January 1988 to mark Australia’s bicentenary.^[10] The first complete polymer series was issued between 1992 and 1996, and Australia became the first country to convert its full banknote series from traditional paper to polymer.^[10][11]

Polymer banknotes were introduced partly as a response to counterfeiting risk and the search for more durable security features. The RBA has described the development of polymer notes as following research into anti-counterfeiting technologies, and its history of banknotes records the transition from paper to polymer across the 1992–1996 series.^[10] Later upgrades under the Next Generation Banknote program introduced new security features and design changes, beginning with the new $5 note issued in 2016.^[11]

Australian banknotes are legal tender throughout Australia, but legal-tender status does not by itself require a private business to accept cash in every transaction. In practice, retailers may specify payment conditions before a transaction, subject to general law and consumer rules. For finance and accounting purposes, the main point is that Australian dollar banknotes are official cash instruments denominated in the national currency.

Coins

Australia’s circulating coins are **5 cents, 10 cents, 20 cents, 50 cents, $1 and $2**. The Royal Australian Mint says it has made more than 15 billion circulating coins since decimal currency was introduced in February 1966.^[12] The 1 cent and 2 cent coins were withdrawn from circulation in 1992, although RBA legal-tender guidance notes that 1 cent and 2 cent coins remain legal tender subject to a low payment limit.^[13]

Coin legal tender is subject to statutory limits. RBA guidance states that coin payments are legal tender throughout Australia, but only up to specified amounts: not exceeding 20 cents if 1 cent and/or 2 cent coins are offered; not exceeding $5 if any combination of 5 cent, 10 cent, 20 cent and 50 cent coins is offered; and not exceeding 10 times the face value if $1 or $2 coins are offered.^[13] These limits are designed to prevent impractical settlement of large debts using excessive quantities of small coins.

Commemorative circulating coins form part of Australian currency practice. The Royal Australian Mint’s policy notes that commemorative circulating designs are typically used on the $1 coin, 50 cent coin and 20 cent coin.^[5] Such coins retain their face value as currency when issued for circulation, even if some examples later acquire numismatic value among collectors.

Exchange-rate regime

The Australian dollar has floated since **12 December 1983**. The RBA’s account of exchange-rate policy states that Australia moved through several exchange-rate regimes before the Australian dollar was eventually floated in 1983.^[2] The float occurred alongside the abolition of most restrictions on international capital movements and was a major step in the liberalisation of Australian financial markets.^[14]

Under a floating exchange rate, the Australian dollar’s value against other currencies is determined mainly by supply and demand in foreign-exchange markets. Market participants include banks, institutional investors, exporters, importers, governments, central banks, corporations and asset managers. The exchange rate is influenced by interest-rate differentials, commodity prices, terms of trade, capital flows, risk appetite, inflation expectations and expectations about Australian and foreign monetary policy.

The RBA has explained that a floating exchange rate can help the economy absorb external shocks. For example, when global demand for Australian exports changes, the exchange rate can adjust, influencing the domestic-currency price of exports and imports and affecting inflation and output.^[15] This adjustment role is one reason the floating currency is closely connected with Australia’s inflation-targeting monetary-policy framework.

The RBA may operate in the foreign-exchange market, but Australia does not operate a fixed exchange-rate target. RBA research on foreign-exchange operations after the float found that its net position from sales and purchases of foreign exchange, including transactions with the Australian Government, fluctuated around zero over the floating period examined, which the authors described as an approximate indication that the RBA had not systematically tried to support or weaken the Australian dollar over the period as a whole.^[16]

Role in monetary policy and financial markets

The Australian dollar is the denomination in which Australian monetary policy is implemented. The RBA sets monetary policy for the Australian economy, principally through the cash rate target and related market operations. Changes in domestic interest rates can affect the exchange rate by altering returns on Australian-dollar assets relative to foreign-currency assets, although the relationship is not mechanical.

For households and businesses, movements in the Australian dollar affect import prices, overseas travel costs, foreign-currency debts, export receipts and the domestic price of tradable goods. A depreciation of the currency can raise the Australian-dollar cost of imported goods and services, while an appreciation can lower those costs but reduce the Australian-dollar value of foreign-currency export earnings. These effects feed into inflation, business margins and national income in different ways across sectors.

In capital markets, Australian-dollar instruments include Commonwealth Government Securities, state and territory debt, bank bills, corporate bonds, deposits, derivatives and listed securities. The Australian Securities Exchange lists equities and other products whose prices and distributions are generally denominated in Australian dollars. The S&P/ASX 200 Index, as an Australian equity benchmark, is also quoted in Australian-dollar terms.

The Australian dollar is widely traded in spot, forward, swap and options markets. Its liquidity makes it relevant for hedging by exporters, importers, superannuation funds and other institutional investors. Australian superannuation funds with foreign assets often consider currency exposure as part of portfolio risk management, although the degree of hedging varies by fund, asset class and mandate.

International usage and market characteristics

The Australian dollar is often described in financial markets as a commodity-linked currency because Australia is a major exporter of commodities such as iron ore, coal, liquefied natural gas and agricultural products. However, the exchange rate is not determined by commodities alone. Interest-rate expectations, global risk sentiment, China-related demand expectations, U.S. dollar movements and domestic economic data can all have substantial effects.

The RBA’s 2025 survey release reported that the Australian dollar’s global turnover share remained around 6 per cent, even though its ranking moved from sixth to seventh compared with the prior survey.^[6] Turnover share is a measure of trading activity, not a measure of economic size or monetary-policy importance. A currency can be heavily traded because it is liquid, accessible and useful in cross-border portfolios, even if the issuing economy is smaller than those behind some other currencies.

The currency is also used by several nearby Pacific economies under separate arrangements, but the Australian dollar’s primary legal and monetary role is in Australia. For encyclopedia purposes, the Australian dollar should therefore be understood primarily as Australia’s sovereign currency, with secondary international relevance through foreign-exchange and investment markets.

Legal tender and acceptance

Australian banknotes and coins are legal tender, but the practical operation of legal tender is narrower than commonly assumed. Legal tender rules determine whether a valid tender of payment can discharge a debt in certain circumstances. They do not necessarily force a seller to accept cash for every retail sale, especially where the seller has clearly specified acceptable payment methods before the transaction.

The RBA’s legal-tender guidance distinguishes between banknotes and coins and sets out coin-specific limits.^[13] This distinction is important in debt settlement, cash-handling policies and retail operations. For example, a payment made entirely in 5 cent coins would not be legal tender above the statutory limit, while a payment in banknotes is not subject to the same coin quantity restriction.

Older Australian banknotes may remain redeemable even when they are no longer commonly seen in circulation. In practice, financial institutions and the RBA provide channels for exchanging withdrawn or damaged notes subject to authentication and policy. Numismatic value is separate from face value: a collectible note or coin may trade above face value, but that premium depends on collector demand, condition, rarity and provenance rather than its role as legal tender.

Significance

The Australian dollar is one of the core institutions of Australia’s financial system. It provides the unit of account for domestic finance, the medium for banknotes and coins, and the denomination for most Australian contracts, wages, taxes, deposits and securities. Its floating exchange rate links domestic monetary conditions to global capital markets while allowing relative prices to adjust to external shocks.

Its history also reflects broader developments in Australian economic policy. Decimalisation in 1966 modernised the domestic currency system; the float in 1983 was part of financial-market liberalisation; and polymer banknotes made Australia an early adopter of a major currency-security technology. Together, these changes make the Australian dollar both a national monetary unit and a significant instrument in global foreign-exchange markets.