TNAG-0455-FCO40-520-Minting-of-new-coins-for-Hong-Kong-1974 — Page 83

G.F. 323

機密

CONFIDENTIAL ##

86.

36-

The grounds for introducing a $5 coin are mainly economic stemming from the fact that a note has a life of less than one year whereas a coin may have a life of up to 50 years. Over the last seven years the number of $5 notes in circulation, as at 31st December, has advanced

from 9.9 million to 21 million an increase of 11.1 million. Over the

same period 71 million notes have been withdrawn for destruction and replaced with new notes. To meet the public demand for a $5 currency

unit and to keep those in circulation in good condition it has, therefore, been necessary to purchase 82 million notes. At present prices these

notes would have cost $5.5 million. Had the currency unit been a coin

only 11.1 million would have been required: they would have cost, at present price levels, about $3.4 million - a saving of $2.1 million. If the trends of the last seven years were to continue during the next ten, then by the end of 1983 61 million $5 currency notes would be in circulation and a further 272 million replacement notes would have been

needed. A total of 312 million notes would therefore have to be

purchased over the next ten years, at a cost, at present day prices, of about $21 million. If the note were replaced by a coin only 40 million

coins would be needed: they would cost about $12 million at present

prices. There would, therefore, be a saving of about $9 million in

the maintenance costs of the $5 currency unit.

87.

The above calculations ignore the once and for all costs of

replacing the 21 million $5 notes now in circulation; the extra cost over the years of storing coin rather than notes; and the fact that

even coins have to be replaced eventually. On the other hand they take no account of the reduction in handling and destruction costs which would

follow the replacement of a note by a coin;

or the probability that,

because each note may have to be replaced as many as 40 to 50 times during the life of an equivalent coin, the note circulation maintenance costs are likely to increase as the result of inflation at a greater rate

than coin circulation maintenance costs.

88.

The Royal Mint estimate that a cupro-nickel coin has a life of about 50 years. However, when the coin is eventually replaced part

of the cost will be offset as the old coin can be melted down to produce a new one. (The metal element in the cost of the proposed $5 coin is over half of the total). In this connection it may be of interest that

CONFIDENTIAL

/although

機密