USD:AUD

On a humid Sydney morning in 1813, in a colony starved of coin and awash with IOUs and rum, officials began punching neat circles out of Spanish silver dollars. The outer rings were stamped “NEW SOUTH WALES 1813” and given a value of five shillings; the punched-out centres—“dumps”—were worth fifteen pence. The “holey dollar and dump” were Governor Lachlan Macquarie’s practical fix for a crippling currency shortage and a way to keep silver from leaking out of the colony with departing ships. It was Australia’s first distinct coinage and a clear sign that a peripheral outpost was improvising its own monetary order. (nma.gov.au, migrationheritage.nsw.gov.au)

Even before that moment, everyday exchange in New South Wales was messy. Barter, promissory notes and spirits all did the work cash was supposed to do. British and other foreign coins circulated, but not nearly enough. The “rum economy” lasted far longer than anyone liked, and only the arrival of gold rushes in the 1850s began to anchor a more conventional system of banking and coinage. Commercial banks sprung up and issued their own paper, often backed by gold—but when a wave of bank failures hit in 1893, public trust in private notes was shaken badly. (Reserve Bank of Australia Banknotes)

Federation in 1901 created a Commonwealth with powers over banking and currency, but it took a few more years to impose order. In 1910 the Australian Parliament passed the Australian Notes Act, centralising note issue in the Commonwealth Treasury and making State and private banknotes illegal tender going forward. To finish the job, the Bank Notes Tax Act imposed a punishing tax on any remaining private issues. Australia’s first federal banknotes followed in 1913, starting with a ten-shilling note. This was the birth of the Australian pound as a national currency, with all the symbolism and discipline that went with it. (Reserve Bank of Australia Banknotes)

Institutional stewardship of the note issue settled only gradually. In 1920, responsibility shifted from Treasury to a Notes Board attached to the Commonwealth Bank; by 1924 the Commonwealth Bank itself controlled the note issue, and after wartime arrangements in the 1940s, the Commonwealth Bank was made sole legal issuer. Then came the modern era: the Reserve Bank Act 1959 split off the central banking functions into a new institution—the Reserve Bank of Australia—which began operations in 1960 and took formal responsibility for Australia’s banknotes. The arc from colonial improvisation to a dedicated, independent central bank had finally closed. (rba.gov.au)

The relationship between money and metal shifted dramatically in the early twentieth century. Like many countries, Australia effectively left the gold standard at the end of 1929 amid the onset of the Great Depression, severing the routine link between notes and gold. A few years later, legislation made that break explicit: by 1932 Commonwealth Bank notes were no longer convertible into gold, and the Bank was no longer required to hold gold reserves against them. The country stayed close to sterling through various pegs, but the old promise—“I pay the bearer in gold”—was now history. (rba.gov.au, museum.rba.gov.au)

If the 1910s and 1920s settled who could issue money, the 1960s reshaped what that money looked like. Decimalisation had been debated for decades; in 1963 the government finally committed to it, and 14 February 1966 became “C-Day,” the day Australians woke up to dollars and cents instead of pounds, shillings and pence. The conversion was a feat of logistics and public education run by the Decimal Currency Board, but it was also an act of identity-building. Decimal coins would use uniquely Australian fauna—designed by a young goldsmith, Stuart Devlin—on the reverse, with the monarch on the obverse. Banknotes adopted modern colours, security features and recognisably Australian motifs. Overnight, cash in the hand looked—and counted—differently. (nma.gov.au, museum.rba.gov.au)

Even the name of the new currency dramatized a changing national mood. Prime Minister Robert Menzies initially announced the unit as the “royal,” a conscious nod to British tradition. Public reaction was swift and chilly, and within months the government switched to “dollar,” a modern, pragmatic label that matched the decimal ambition and signalled a tilt toward a broader—no longer mainly British—economic horizon. (museum.rba.gov.au)

Coinage followed that logic of renewal. The Royal Australian Mint opened in Canberra in 1965 to strike the new decimals, launching 1c, 2c, 5c, 10c, 20c and 50c coins. Devlin’s animals—the echidna, lyrebird, platypus—quickly became cultural fixtures. Practicality kept reshaping the set: a round 50c in 1966 gave way to a distinctive 12-sided coin in 1969; a $1 coin arrived in 1984 to replace a short-lived note; a $2 coin followed in 1988. Later, inflation and minting costs pushed the coppery 1c and 2c out of circulation in 1992. Each change was an administrative decision, but together they trace how a modern cash system evolves to fit machines, wallets and prices. (Royal Australian Mint)

Design choices carried politics, too. Decimal coins kept the monarch’s effigy, but note iconography shifted toward local stories and figures. Half a century later, symbolism took another sharp turn. In 2023 the Reserve Bank announced Australia’s $5 note would be redesigned to honour First Nations culture and history rather than replace Queen Elizabeth II with a portrait of King Charles III. Meanwhile, his effigy began appearing on circulating coins through 2024. The split—sovereign on coins, Indigenous design on the lowest-denomination note—captures how a currency records a nation’s arguments with its past and its aspirations for the future. (rba.gov.au, ABC)

There is, of course, another side to “formation”: the price of money, not just its look. For much of the twentieth century Australia’s exchange rate regime tied the local currency to others. A decisive moment came in November 1967 when Britain devalued sterling; Australia chose not to follow, setting the stage for greater autonomy. As the Bretton Woods system eroded, the Australian dollar was revalued and pegged to the US dollar in December 1971; later the peg shifted to a trade-weighted basket and then to a crawling peg in the mid-1970s. The final break arrived in December 1983, when the Hawke government floated the dollar and scrapped most exchange controls. From then on, markets—rather than officials—set the value of Australia’s money. (rba.gov.au, unreserved.rba.gov.au)

Floating the currency did not erase the Reserve Bank’s role; it changed it. Monetary policy—interest rates and open-market operations—became the primary tool for targeting inflation and stabilising the business cycle, inside a deregulated financial system. The RBA describes its own journey from direct controls to today’s framework as a decades-long shift toward market-based methods and operational independence. In that sense, the “formation” of Australian money is as much about institutions and credibility as it is about notes and coins. (rba.gov.au)

Security technology tells a parallel story of national inventiveness. Australia pioneered polymer banknotes: a commemorative $10 polymer note in 1988 marked the bicentenary; by the mid-1990s, the full circulating series had moved from paper to polymer—a world first—promising longer life and tougher anti-counterfeiting features. Between 2016 and 2020, a new polymer series added see-through windows, tactile features for the vision-impaired and redesigned security elements. These technical choices, born from collaboration between the RBA and the CSIRO and realised by Note Printing Australia, made Australia a reference point in global banknote design. (Reserve Bank of Australia Banknotes)

Look back and the pattern is clear. The holey dollar episode shows an authority improvising to solve a concrete problem—too little coin—and to keep value inside the colony. The 1910 reforms impose uniformity by ending private money and centring the sovereign’s power over notes. Decimalisation stages a modern, distinctly Australian visual language for cash and aligns arithmetic with trading partners. Exchange-rate liberalisation and the 1983 float accept a world in which external prices move constantly and policy aims at stability through rules and transparency rather than fixed pegs. Polymer notes remind us that security and durability can be a national comparative advantage. And today’s design debates—over whose faces or stories appear—underscore that currency is both an economic tool and a cultural mirror.

If there is a through-line, it is pragmatic nation-building. Australia’s money formed as Australians solved the problems right in front of them: how to pay for goods, how to inspire trust in paper, how to make counting easier, how to keep value secure, how to live in a world of volatile capital flows, how to reflect who “we” are on our money. That is why the country can move from a ring-shaped Spanish coin reborn as a colonial fix to a floating, polymer-based dollar run by a modern central bank—without losing the thread. Each step is grounded in the same, quietly radical idea: money should serve a young, outward-looking society and evolve with it.

And that evolution continues. The coin effigy now carries a new monarch, while the next $5 banknote will honour First Nations people and their enduring connection to Country. Even as cash’s share in day-to-day transactions shrinks, the symbols, laws and institutions behind it keep working, reminding us that a currency is not just a means of payment. It is a living record of how a community defines value, authority and belonging—written in metal, polymer and policy. (ABC, rba.gov.au)

Sources

• Reserve Bank of Australia, History of Banknotes (early makeshift currencies; private banknotes; Australian Notes Act 1910; first Commonwealth notes 1913; transfers of note-issuing authority; polymer series and Next-Gen notes). (Reserve Bank of Australia Banknotes)

• National Museum of Australia, Holey Dollar (Macquarie’s 1813 reform; valuations; circulation and replacement). (nma.gov.au)

• NSW Migration Heritage Centre, 1813 New South Wales Holey Dollar & Dump (Macquarie’s purchase of Spanish dollars to stabilise the colony’s money). (migrationheritage.nsw.gov.au)

• Reserve Bank of Australia, A Brief History (RBA Act 1959; separation from Commonwealth Bank; evolution of functions). (rba.gov.au)

• RBA Museum, Decades of Change and Stability (formal end of convertibility and gold reserve requirements by 1932). (museum.rba.gov.au)

• RBA Research & Discussion, 1930s Depression (effective departure from the gold standard at end-1929). (rba.gov.au)

• National Museum of Australia, Decimal Currency (C-Day, rationale and rollout). (nma.gov.au)

• RBA Museum, The Decimal Revolution booklet (the “royal” vs “dollar” naming decision; coins at the Royal Australian Mint; public education campaign). (museum.rba.gov.au)

• RBA Museum, A New Currency (Stuart Devlin’s decimal coin designs; 14 February 1966). (museum.rba.gov.au)

• Royal Australian Mint, One Dollar (introduction of the $1 coin in 1984). (Royal Australian Mint)

• Royal Australian Mint, Two Cents (withdrawal of 1c and 2c; policy rationale). (Royal Australian Mint)

• RBA, Research Guide: Float of the Australian Dollar (decision of 9 December 1983; context). (unreserved.rba.gov.au)

• RBA, From the Archives: The London Letters (Australia declined to devalue with sterling in 1967). (rba.gov.au)

• RBA, Trade-weighted Index methodology (USD peg 1971–74; crawling peg in 1976). (rba.gov.au)

• RBA Media Release (2 Feb 2023), New $5 Banknote Design (First Nations theme). (rba.gov.au)

• ABC News (15 May 2024), King Charles III effigy on Australian coins (rollout across denominations). (ABC)

Note: Where dates around the gold standard differ in official sources, I’ve reflected the nuance: Australia effectively left at end-1929, with legislation and practice in the early 1930s completing the shift away from gold convertibility. (rba.gov.au, museum.rba.gov.au)