Tap-and-go payments and the decline of coins are hurting the Royal Australian Mint despite its plan to make up lost revenue with a rise in profits from selling collectors' items and manufacturing currencies for countries overseas.
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The federal auditor has found the mint - Australia's sole supplier of coins and a fixture among Canberra's beloved national institutions - is yet to make up for falling revenue following years of dwindling coin use.
Efforts to fill the gap fell short despite 444 per cent growth in profit from its commercial work manufacturing popular collector's edition coins, medals and precious metal products. Profits rose over two years from $2.5 million to $13.6 million in 2017-18.
The rise of PayPass, payWave and online shopping have undercut coin circulation in Australia, and profit from the mint's work manufacturing national currency dropped from $83.5 million in 2013-14 to $52.0 million in 2017-18.
Coin circulation will drop further and cut that figure to $16 million by 2020 as commercial banks purchase fewer coins, the mint estimates. Two years after noticing falling demand in 2013, it began planning ways to adapt, and decided to rely more on commercial manufacturing.
In a report released on Tuesday, the Australian National Audit Office found profits from coin circulation had fallen every year since 2013, except for 2015, when they temporarily spiked.
"The mint forecasts that demand for circulating coins will gradually fall with five cents and 10 cents pieces declining at a faster rate," the auditor-general said.
The Royal Australian Mint wants to limit profit losses from falling coin circulation to less than $10 million annually over the four years to 2020. Its profit fell $10 million last year.
Commercial work now brings in half of its revenue, up from 20 per cent in 2013, and the mint is equipped to plan for its transition to a world of declining currency circulation, the national auditor says. Its commercial business has been profitable since 2014.
Rising profits from its commercial work would strengthen the mint's financial position, the report said.
Its attempt to adapt by supplying collector and foreign circulating coins, precious metal products, medals, and through custom and corporate minting, had not yet made up for falling revenue. The mint, seated inside the Treasury portfolio, had also not returned its commercial profits to the federal government.
Among its plans to stem falling profits, the Royal Australian Mint has started releasing specially-marked $1 coins into circulation for the public to find and use as entries into a competition draw. It's yet to act on another plan that would cut costs by changing metal content in coins and making them smaller.
Auditor-general Grant Hehir found the rapid expansion in the mint's commercial business should prompt the government to consider its future as a non-corporate public service agency, to make it easier to return profits to federal coffers.
Mr Hehir's national audit office urged the mint to review itself and advise the government on ways to regrow its revenue. In response, the mint agreed to the recommendation.
Treasury has not directed the Royal Australian Mint on the level of profit, or "seigniorage", it expects from its work minting coins. It has also not asked explicitly for the mint to plan work to adapt to falling coin circulation.
After reviewing the mint's future in 2015, the Coalition government announced it would remain its owner.
