Collecting and Investing in Old Money

RICHARD E. FAHY OF THE RIGHT NOTE LOOKS AT THE REMARKABLE INVESTMENT PERFORMANCE OF AUSTRALIAN PAPER MONEY

If you talk to knowledgeable collectors anywhere in the world, and ask about Australia’s best-known collectable, they will be familiar with the 1930 penny, which has increased in value by 10% per annum, irrespective of wars, inflation, recession, and any other factors you can name. However, areas of collecting/investing are emerging to eclipse even this magnificent item, and to ignore them is to miss out on perhaps the most exciting opportunities.

According to a recent report from Access Economics, Australian paper money has increased in value by more than 15% per year for the past eight years, outperforming the share market, real estate, and all other more conventional products. But, if you talk to your financial advisor or accountant, he may nmever have heard of such an investment. That is because up to now it has been Australia’s best-kept secret and, by the its very nature, does not lend itself to mass marketing – there are only so many notes left and they become rarer as time passes. Do you know what the average weekly wage was before Word War I? Consider how many people back then could afford to put away a 5 pound or a 10 pound (or even a higher denomination) banknote for posterity?

But some did, and they survive to this day – some even in an in uncirculated condition.

Ever since official banknote production started in 1913, the authorities of the day have demanded that only the best designers, artists, printers and engravers work on the plates. So we have left with a legacy of banknotes of marvellous clarity, detail, quality and beauty.

Of course it would be imprudent just to start buying old notes at random, as some are improving at a much higher rate than others. A friend in the business would be an invaluable asset, but we can demonstrate areas which have performed well to date, and which hold promise for the future.

Star Notes

Originally, when a note was damaged or destroyed in the printing process, its serial number had to be painstakingly printed by hand onto a replacement. Then it was decided to produce a small ‘run’ of separately numbered notes and use them to replace soiled or missing ones. To differentiate between ordinary notes and the replacements, an asterisk (*) was added to the serial number of the new notes, which would then be inserted into the bundle.

They were designed to go into circulation – and indeed most did in the beginning, until collectors recognised that they represented a unique opportunity to obtain really rare notes. Once word got out, star notes (as they are known) became much sought-after, and were snaffled up shortly after they arrived at the tellers, by collectors who would ‘trawl’ the banks looking for them.

Today, star notes represent the highest overall return of banknotes, and some star notes have increased in value by over 20%, year in, year out.

Pre-Federation Notes

Prior to Federation in 1901 when the new government started the process to issue a national currency, banknotes were issued by private banks. Banks had sprung up at various stages in the colony’s growth, spurred by gold rushes and booming economies, then closing down when recessions followed. Dozens of banks with exotic names like the English, Scottish & Australian Charted Bank (forerunner of the ANZ), the Bank of Van Diemen’s Land, and the Provincial and Suburban Bank, came and went as the economy of the colony waxed and waned. It is interesting that our very first bank, established by Governor Lachlan Macquarie in 1817 in Macquarie Place in Sydney, is still operating today as Westpac.

Not all banks kept accurate records of their note production, and it is not known how many old notes are still to be discovered. Every so often a hoard is found, and it causes a flurry in numismatic circles. Of course, any private banknote is now a true antique, as they are all over 100 years old. It is an area of banknote collecting that does not receive a lot of publicity, partly because people simply do not know it exists, partly because the prices the prices of some notes put them out of the consideration of most collectors, and partly because the main body of the industry focuses on new releases, polymer notes, etc. I believe that as the anniversary of Federation approaches, interest will stir, and this area is currently a ‘sleeper’.