Withdrawal of 5 cent coin will not cost consumers, bank says

1.00pm

The Reserve Bank says consumers will not be hit by extra costs if it proceeds with a proposed withdrawal of 5 cent coins.

The bank's currency manager Brian Lang this morning announced the proposal, which also includes making 50c, 20c and 10c coins smaller and from a lighter and lower-cost plated steel.

Most retailers use a Swedish rounding system where they can round up or down, currently to the nearest 5c. Withdrawing that coin means prices will be rounded to the nearest 10c.

Retailers chose a mix of up or down when 1c and 2c coins were withdrawn in 1990, Mr Lang said.

"In fact, a survey taken by the Consumers Institute shortly after that showed that prices actually decreased slightly," he said.

"We believe the competition will keep retailers honest with that rounding and... we believe it will have no effect on pricing at all."

However, the costs of such things as re-calibrating parking meters could be passed on to consumers by councils.

"We have consulted all those groups and that is a transition cost that the industry will bear," Mr Lang said.

"(But) we believe that the longer-term benefits of moving to lighter and smaller and less expensive coins outweigh the cost of the transition.

"The technology is moving in the right direction for that."

For councils with high-tech parking machines the change would be a simple matter of adjusting a computer but for older-style meters -- used in many centres nationwide -- much more would be involved.

However, the change will save the Reserve Bank about $2 million a year because the plated steel cost less to manufacture.

"Our silver coins are among the largest and heaviest in the world," Mr Lang said.

"Due to past high inflation, our 5c coin is now worth less than half what 1c was worth back in 1967.

"The proposals issued today would give New Zealand a coherent and logical set of coins that would be more convenient for the public, easier for those handling coin in bulk, such as banks and security firms, and less costly to manufacture, saving annually about $2m."

Canada, Britain and South Africa already used plated steel coins, and Euro coins were also made out of it, Mr Lang said.

Currently, $400 of 20c coins weighed 23kg; the same value in the proposed new coins would weigh 8kg. Not only were they lighter but they would take up less storage space, Mr Lang said.

AC Neilson had carried out two opinion surveys for the Reserve Bank on the issue, one of retailers and the other of the public.

Banks, security companies, the vending industry and other organisations such as the Consumer's Institute had also been consulted.

"The public opinion survey showed that six out of 10 people did not carry 50c and 20c coins because they find them too bulky," Mr Lang said.

"Many people could not remember what they do with 5c coins when they get home but we believe they probably finish up in jars."

Consultation on the issue will run until February 4 and a decision will be made soon after.

The proposals, if implemented, will be effective from July 2006, with a three-month changeover period.

- NZPA