The road to smaller, lighter coins

Top: The old coins: Bottom: The new coins

When you pop into the shop on Monday to buy a paper or some milk, you are likely to receive smaller, lighter 50, 20 or 10 cent coins in your change.

The new coins will be water-cooler talk for a couple of days. Then we'll all get on with it. But for the Reserve Bank, their introduction is the culmination of years of planning, investigation and testing.

New Zealand's current silver coins are big and heavy by world standards. Our 50c coin, for example, is one of the largest circulating coins. Weighing 13.61gm it is 75 per cent heavier than the Euro 50c coin. The big coins are a relic of New Zealand's pre-decimal days and were left large to match the old half crown and the florin because, at the time, it was thought they would be more readily accepted.

Reserve Bank surveys have found that the 50c coin does not circulate well - people are reluctant to carry it around because of its size, many preferring instead to build up a stockpile of 50s at home.

The idea of reducing the size of New Zealand's silver coins was first mooted in 1987, in a report written for The Treasury, although no action was taken at the time. In 1989 the Reserve Bank took over responsibility for coin issue and in 1997 the Bank undertook a survey that asked the public and retailers for their thoughts about phasing out 5c coins and downsizing the 50c and 20c coins. Two-thirds of those surveyed were in favour of the removal of the 5c and of smaller 50c and 20c coins. Changing the coins was seriously considered, but with plated steel coin technology not available, there was not the same cost-benefit that would provide the impetus nine years later.

From 2000 metal prices began to rise steeply, sending the cost of manufacturing a 5c coin to 4.8c. The Reserve Bank was close to making a loss on its most commonly-produced coin.

In 2003 Reserve Bank Governor Alan Bollard gave the go-ahead for the new coins project to be taken up again. Plated steel coins were now available, so the cost savings of making the existing silver coins smaller, and moving from alloy to plated steel were considerable.

Further surveys were carried out, and public opinion was still strongly in favour of dropping the 5c coin and reducing the size of the 50c and 20c. The Reserve Bank also talked to affected groups - the vending machine industry, banks, bank staff, and large and small retailers. There was overall support for the proposed changes.

While the vending machine industry would be the most affected, as it would have to change all its coin mechanisms, it also had a lot to gain. The industry had particular issues with the old coins - the 5c tended to jam machines, and the 50c was larger than the maximum industry-recommended size.

There were also considerable savings to be made. The old silver coins - made of a mixture of copper and nickel - cost an average of 10c per coin to make. In contrast, the average cost of the new coins - made of the much cheaper plated steel - is 3c. Plated steel technology had come of age and is now used widely, including for the new Euro 1c, 2c and 5c coins and coins issued in the UK, Canada and South Africa.

Everything therefore pointed to smaller, lighter 50, 20 and 10c coins, and the decision to reduce them was made in March 2005. The 5c coin would go at the same time - it was now worth less than a half-cent coin would have been in 1967 when decimal currency was introduced.

Attention turned to sourcing new coins just the right size, weight and electromagnetic signature. If a coin's electromagnetic signature is not spot-on, it will not be accepted by vending machines.

Each coin has a signature or thumbprint that tells vending machines that it is a New Zealand coin of a particular value. This is why we can't pay for parking using washers or tokens. A coin's electromagnetic signature is also important to detect counterfeit coins.

The new coins are made of a mixture of plated steel, nickel and copper. The plated steel makes up 97 per cent of the coin, with small amounts of nickel providing hardness, and small amounts of copper enabling the programming of an electromagnetic signature.

The Reserve Bank advertised for a mint to supply the new coins, and three were short-listed. Two Crown Research Institute scientists were sent to confirm the mints would be able to provide plated steel coins with a unique electromagnetic signature. Eventually, the Royal Canadian Mint was selected.

So began the manufacturing - in all, 230 million new coins have been produced for use by the New Zealand public over the next two years. That's 140 million 10c coins, 50 million 20c coins and 40 million 50c coins. Every coin has gone through a type of giant vending machine to check its electromagnetic signature. Those not up to scratch are discarded. The New Zealand vending machine industry has had the coins since January and to date there have been no reports of rejected coins.

Fifty container loads of new coins have been shipped to New Zealand from the Royal Canadian Mint and over the past four weeks 84 million new coins have been delivered to every bank branch in the country.

Based on what happened when the Euro was introduced, the Reserve Bank expects a significant number of the old coins to be returned. These will be shipped overseas for smelting, and then made into new coins. The Australian Mint normally purchases coin "blanks" from the company melting down the old New Zealand coins - so there's a good chance our coins will reappear in a new guise across the ditch.

In 1999, polymer bank notes replaced paper notes in New Zealand - these last a lot longer than paper notes, and allow for more sophisticated security features. The introduction of the new steel-plated coins will mean we have the world's most modern and cost-effective notes and coins.

It's been a long and complex road to smaller coins, but the time has finally come for us to lighten up.

Our currency

* Coins don't stay around for ever. Their "mortality rate" is estimated at about 27 million a year. This is through coins getting lost, being damaged, or being taken out of the country by tourists.

* Bank notes that have been in public circulation are run through machines when they return to the Reserve Bank to check they are genuine. Forgeries have fallen considerably since the introduction of polymer bank notes.

* If you tear a bank note in half, all is not lost. The Reserve Bank will give you the full value of a note if you still have more than two-thirds of it and half its value if you present between a third and two-thirds. If you have less than a third, you're out of luck!

* The first two numbers of a note's serial number show the year it was made.

* The durability of coins is thoroughly tested before they are issued. Sample coins are put into tumblers and spun for hours until they have the equivalent of 15 or 20 years wear. Coins in public circulation can last upwards of 25 years.

* In Britain, from the time of Charles II onwards, a tradition developed of successive monarchs being represented on coins facing in the opposite direction to their immediate predecessor. There was an exception to this in the brief reign of Edward VIII, who liked portraits of himself facing to the left, even though he should have faced to the right according to tradition. This tradition was restored with the reign of George VI. The tradition is also followed in New Zealand, and Queen Elizabeth II is shown to be facing right on our coins.

* Next time you clean out the piggy bank to pay for that basket of groceries, remember this. Retailers do not have to accept silver coins as the only form of payment for goods costing more than five dollars.

* New Zealand is one of the few countries with coins made of three layers of metal on top of the steel core - nickel, copper, then nickel again. This gives the coins a unique electromagnetic signature that is important if they are to work correctly in vending machines.

* Some vending machines can measure more than 10 physical and electronic properties of a coin. Most measure the electromagnetic signature of a coin by passing it between coils that carry an electric current.

- Brian Lang is the Reserve Bank's currency manager