Investing

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Investing In Australian Banknotes       Australian Banknote History       Privacy       Affordability

Liquidity       Manageability       Australian Banknote Values       Updating Values

Estimations       Values       Variance       Errors in Catalogues       Rarity       

Collecting Banknotes       Grading Banknotes       How to look at a banknote

Cleaning, washing, pressing of banknotes       The Term "Uncirculated"       Grading Guide - definition of terms

Definition Of Banknote Terms        Plate Identification Letters (PIL)       Gothic and OCRB       Special Serial Numbers

 

Australian Banknote History

After federation in 1901, when Australia became an independent nation, the federal government became responsible for the currency. The Australian Notes Act was passed in 1910. In 1913 the first series of Australian notes was issued, based on the old British sterling system.

The pound was the currency of Australia until 1966. It was subdivided into 20 shillings, each of 12 pence.

Australia issued the world's first polymer note, a $10 commemorative note, in January 1988, to mark Australia's bicentenary. This note incorporated radical new technology developed in Australia and set the scene for a new era of currency notes in the world.

Australia is the first country in the world to fully convert to polymer bank notes. As of 15.05.96, all denominations of Australian currency in circulation were polymer (paper banknotes were in still circulation but were being withdrawn).

Since 1913 there have been seven series of Australian notes issued. The present series of Australian notes is the first in the world to be printed on polymer substrate instead of paper. It consists of $5, $10, $20, $50 and $100 denominations. The $1 note ceased to be issued following the introduction of a $1 coin on 14 May 1984. Similarly, a $2 note was withdrawn following the introduction of a $2 coin on 20 June 1988.

Investing In Australian Banknotes

There is a strictly finite supply of Australian Banknotes. We have seen the transition to decimal currency, then the conversion from paper to polymer banknotes. The $1 and $2 notes have ceased to be issued and have made way for coins. Due to fire, theft or just carelessness, the limited supply of notes is also slowly reduced. These events only enhance the value of the remaining notes, which as you know, which can never be reproduced.

Investing

For some time now there has been a steady demand for Australian Banknotes, particularly from the Superannuation sector - especially Self Managed Funds. Rare Australian Banknotes are Federal Government approved for inclusion in company and personal superannuation funds. According to the Australian Taxation Office collectibles and fine art can be classified as legitimate investments. As it is widely acknowledged that the smart investor should place up to 20% of their discretionary funds in Tangible Assets in order to maintain a well balanced investment portfolio, to this end bank notes are the perfect choice.

Disclaimer : Past performances are no indication of future returns.

The disclaimer used by every investment provider. Fortunately, this does not apply here. Australian Banknotes were rated the No.1 Asset class performer for the 10 year period of 1991-2001. Over that 10 year period Australian banknotes rated higher than vintage wines, thoroughbred horses, national and international shares. Banknotes do not attract annual taxes or maintenance fees, unlike bank interest, company and personal superannuation funds.

Privacy

Australian Banknotes are one of the few remaining investments that may be privately accumulated. This makes them attractive to all investors who do not necessarily want to let the rest of the world know what they buy, sell or hold at any particular point in time. Sales are confidential as there is no need to lodge any paperwork with statutory authorities.

Affordability

Australian Banknotes are still very affordable to any investor. Despite their record of consistent price gains Australian Banknotes are still available in a wide range of investment levels. Whether you wish to start with $100 or $5,000, there are ample opportunities to invest.

Liquidity

Australian Banknotes, due to their strong demand, are a very liquid assett. All or part of your banknote portfolio, may be sold at any time. There are no penalties, early exit fees or locked in investment terms. You choose when to buy or sell, and how long you would like to hold on to them.

Manageability

Australian Banknotes are very easily stored and transported. You have total physical control over your assets.

Australian Banknote Values

Many collectors believe that the print catalogues represent the final word on banknote values. Experienced collectors and dealers know much better. While the various catalogues are invaluable guides, and are highly recommended for all serious collectors, they are not the definitive word on pricing.

Catalogue and market values for banknotes often differ for many reasons :

Updating Values

Catalogues take many months to produce, and by the time of publication, much of the information contained in them may be already outdated. A sudden increase in the value of a specific note will not appear until the next catalogue, which may be not be released for another 12 months time.

Estimations

Even though the catalogue valuers always do their very best to provide honest values, the fact remains that they are not always reporting actual sales but rather simply providing an estimate of the value of banknotes that may not have been handled or sold in years.

Values

It is very unusual for a catalogue to show a drop in value, even though this sometimes happens. Just as the sale prices of land, stamps and coins fluctuate so also do the prices for investment banknotes.

Variance

Collectors who specialize in particular notes will confirm that there can be vast differences in the market values of some banknotes especially with the first and last printed serial numbers in a series. It has only been in recent times that some valuations have picked up on these very specifics.

Errors in Catalogues

Catalogues have been known to contain errors such as missing note sequences and unlisted dates. They may also contain  some incorrect values due to printing errors.

Rarity

Collectable banknotes are not a commodity that is readily available on all retail markets at a set price. True rarities may come on the market only once in a lifetime, and even some of the more common notes are sometimes impossible to find.

The two main indicators of value are rarity and condition,

Collecting Banknotes

The market for Australian banknotes now rivals that of coins and stamps, and the prices being obtained for these banknotes at auction are staggering. They are showing an annual average capital return of approximately 17.5% over the past 15 years.

It is for that reason that banknotes should be accumulated now. Global financial markets are in turmoil. Interest rates are dropping every month. The value of any money in term deposit areas is diminishing at an alarming rate. The price of banknotes are at an all time low (as a percentage of their real value) and are a perfect investment vehicle.

There are many ways of assembling a collection of banknotes without having to spend a fortune. You can start collecting topical notes such as ten shilling and one pound notes only. Another way of assembling a meaningful collection is to use historical releases, by collecting all of the King George VI banknotes, or perhaps all notes issued between certain dates.

The easiest way to start your collection is to buy a "beginners set" of banknotes. That way you start your own collection of banknotes from scratch and at a low cost without spending many days and weeks collecting one banknote at a time.

Grading Banknotes

Grading is the most controversial component of paper money collecting today. Small differences in grade can mean significant differences in value. The process of grading is so subjective and dependent on external influences such as lighting, that even a very experienced individual may well grade the same note differently on separate occasions.

To facilitate communication between sellers and buyers, it is essential that grading terms and their meanings be standardized and as widely used as possible. This standardization should reflect common usage as much as practicable.

The grades and definitions as set forth below cannot reconcile all the various systems and grading terminology variants. Rather, the attempt is made here to try and diminish the controversy with some common sense grades and definitions that aim to give more precise meaning to the grading language of paper money.

How to look at a banknote

In order to ascertain the grade of a note, it is essential to examine it out of a holder and under a good light. Move the note around so that the light bounces off at different angles. Try holding it up obliquely so that the note is almost even with your eye as you look up at the light. Hard-to-see folds or slight creases will show up under such examination. Some individuals also lightly feel along the surface of the note to detect creasing.

Cleaning, washing, pressing of banknotes

Cleaning, washing or pressing paper money is generally harmful and reduces both the grade and the value of a note. At the very least, a washed or pressed note may lose its original sheen and its surface may become lifeless and dull. The defects a note had, such as folds and creases, may not necessarily be completely eliminated and their telltale marks can be detected under a good light. Carelessly washed notes may have white streaks where the folds or creases were (or still are).

Processing of a note which started out as Extremely Fine will automatically reduce it at least one full grade.

Glue, tape, or pencil marks may sometimes be successfully removed. While such removal will have a cleaned surface, it will improve the overall appearance of the note without concealing any of its defects. Under such circumstances, the grade of the note may also be improved.

The words "pinholes", "staple holes", "trimmed", "writing on face", "tape marks", etc. should always be added to the description of a note. It is realized that certain countries routinely staple their notes together in groups before issue. In such cases, the description can include a comment such as "usual staple holes" or something similar. After all, not everyone knows that such-and-such a note cannot be found otherwise.

The major point of this section is that one cannot lower the overall grade of a note with defects simply because of the defects. The price will reflect the lowered worth of a defective note, but the description must always include the specific defects.

The Term "Uncirculated"

The word "Uncirculated" is used in this grading guide only as a qualitative measurement of the appearance of a note. It has nothing at all to do with whether or not an issuer has actually released the note to circulation. Thus the term "About Uncirculated" is justified and acceptable because so many notes that have never seen hand-to-hand use have been mishandled so that they are available in, at best, AU condition. Either a note is uncirculated in condition or it is not, there can be no degree of uncirculated. Highlights or defects in color, centering and the like may be included in the description but the fact that a note is or is not in uncirculated condition should not be a disputable point.

Grading Guide - definition of terms

UNCIRCULATED

UNC - A perfectly preserved note, never mishandled by the issuing authority, a bank teller, the public or a collector. Paper is clean and firm, without discoloration. Corners are sharp and square, without any evidence of rounding. An uncirculated note will have its original, natural sheen. Paper notes my have a slight rippling in the watermark area. Polymer notes may have a slight buckling from the plastic strap used to bundle the notes.

ABOUT UNCIRCULATED

aUNC - A virtually perfect note, with some minor handling. May show very slight evidence of bank counting folds at a corner or one light fold through the center, but not both. An aUNC note can not be creased, a crease being a hard fold which has usually "broken" the surface of the note. Paper is clean and bright with original sheen. Corners are not rounded.

EXTREMELY FINE

EF - A very attractive note, with light handling. May have a maximum of three light folds or one strong crease. Paper is clean and bright with original sheen. Corners may show only the slightest evidence of rounding. There may also be the slightest sign of wear where a fold meets the edge. The note should not be stained or faded or have any other faults or problems.

VERY FINE

VF - An attractive note, but with more evidence of handling and wear. May have several folds both vertically and horizontally. Paper may have minimal dirt, or possible colour smudging. Paper itself is still relatively crisp and floppy. There are no tears into the border area, although the edges do show slight wear. Corners also show wear but not full rounding.

FINE

F - A note which shows considerable circulation, with many folds, creases and wrinkling. Paper is not excessively dirty but may have some softness. Edges may show much handling, with minor tears in the border area. Tears may not extend into the design. There will be no center hole because of excessive folding. Colours are clear but not very bright. A staple hole or two would not be considered unusual wear in a Fine F note. Overall appearance is still on the desirable side.

VERY GOOD – (This normally only appears in the grading of Pre Decimal banknotes)

VG - A well used note, abused but still intact. Corners may have much wear and rounding, tiny nicks, tears may extend into the design, some discoloration may be present, staining may have occurred, and a small hole may sometimes be seen at center from excessive folding. Staple holes and pinholes are usually present, and the note itself is quite limp but NO pieces of the note can be missing. A note in VG condition may still have an overall not unattractive appearance.

GOOD

G - A well worn and heavily used note. Normal damage from prolonged circulation will include strong multiple folds and creases, stains, pinholes and/or staple holes, dirt, discoloration, edge tears, center hole, rounded corners and an overall unattractive appearance. No large pieces of the note may be missing. Graffiti is commonly seen on notes in G condition.

Definition Of Banknote Terms

Intaglio

The process of intaglio printing was the most popular form used by banknote printing companies. It is an extremely time intensive process and requires the combined handiwork of highly skilled artists, steel engravers, and plate printers. Engraved printing plates are covered with ink and then the surface of each plate is wiped clean, which allows the ink to remain in the "valleys" of the design and letter grooves of the plates. Each sheet is then forced, under extremely heavy pressure, into the finely recessed lines of the printing plate to pick up the ink. The printing impression is three-dimensional, creating "mountains of ink" on the banknotes. The height of these "mountains" depends upon the depth of the grooves that the engravers made on the plates, the quantity and type of ink used, and the pressure applied to force the paper into the plates. The surface of the note feels slightly raised, while the reverse side feels slightly indented. This process is called intaglio printing.

Definition of Original Raised Ink

An original banknote printed using the Intaglio process noted above will have definition of detail discernable by touch. There will be height to the ink. Different parts of the banknote will feel more raised up than others due to the fact that the engravers would engrave the plates at differing depths for different features of the banknote. As time goes by and the banknote gets circulated more and more, the height of the ink is slowly worn down until the note finally ends up looking "flat" and loses it's bright colours. If a banknote is washed or pressed, the "mountains" become flattened and loss of definition is noticeable. A true original high grade banknote will retain some or all of this original definition.

Orientation Bands

In an effort to assist in the sorting of large stacks of notes, orientation bands were printed at the top and bottom. The original orientation bands that were used were approximately seven (diagonal) lines wide. When new printing plates were made (after a number of the existing printing plates were damaged), a variety occured with about four lines in the orientation bands, now referred to as wide orientation bands. The former narrow variety is found in about 13,000,000 notes (in prefixes HC 95 to KC 95 only) out of a total of 95,000,000 $5 notes printed in 1995.

Pick Numbers (abbreviated P#)

The Standard Catalog of World Paper Money is a very well-known catalogue of banknotes that is published by Krause Publications in three volumes. These catalogues are commonly known in the numismatic trade as the Pick catalogues, as the numbering system was originally compiled by Albert Pick.

The numbering system uses capital letters (e.g. 'P', 'PS', 'PM') and an integer to identify a note. If a note has signature or date variants, then a lower case letter follows. Therefore P#37b refers to r72.

Plate Identification Letters (PIL)

Plate Identification Letters are very small letters found on each banknote of nearly all paper decimal notes issued. Although initially thought to be a security device, it seems that some markings were included to assist with quality control. The plate letters were on the intaglio printing plates. It is interesting to note that the prefix letters of a banknote run alphabetically and consecutively across the sheet (left to right).

Plate Identification Letters were to be phased out by 1990 and prior to the introduction of polymer notes. Despite this, an interesting feature occurred during the latter part of the printing of the 1993 Fraser Cole paper Ten Dollar note. Throughout bundles of the last print run there was a plate letter on every third note.

How to Locate The Plate Identification Letter : Hold a rule vertically from the the "F" of the Fraser signature and follow it up approximately 30mm. If there is a plate letter it will be sighted on the outside of the left corner of a square in the intaglio design.

As far as can be determind all letters of the alphabet were used, except "I" and "W". When plate letters were used a second time, a vertical line was printed before the letter.

Security Threads

In 1988, after significant research and development by the CSIRO and the Reserve Bank of Australia, Australia produced the first polymer banknote made from biaxially-oriented polypropylene (plastic ), and in 1996 became the first country to have a full set of circulating polymer banknotes of all denominations.

Polymer decimal banknotes were developed to improve durability and prevent counterfeiting through incorporated security features, such as optically variable devices and metallic security threads that are extremely difficult to reproduce. A thread is embedded in the paper. It cannot be seen by simply looking at the note, however if one holds the note up to the light, it becomes visible as a dark line across the note.

A metallic security thread down the centre of each note was added in 1974 to make forgery more difficult. The initial location the exact centre of the note where most notes were folded. It was found that the tendency to fold notes along the centre caused an excessive amount of wear and tear. As this was the exact position where the metallic thread was originally placed in 1974, it was decided to reposition the Security Thread to the side of the note.

Selvedge

The original definition of Selvedge refers to the border consisting of an ornamental fringe at either end of an oriental carpet. As banknotes are printed in large sheets, selvedge on bank notes refers to the printing marks on the edge or margin of those sheets. After the sheets have been cut up into blocks of 2 and 4, the printing marks are left on the notes. Selvedge can add value to uncut notes.Serial Numbers

Gothic and OCRB

The gothic font is the narrower type of font - in both the letters and numerals. It is narrower, and the overall width of the serial number is not as wide as the OCRB.

OCRB is Optical Character Recognition (also known as Optical Code Readable B), with the B being the second font - an advancement on the A font. It was introduced on banknotes because it could be read by machines and computer software, allowing for the sorting/colation of notes to be automated.

Special Serial Numbers

One of the most enjoyable aspects of collecting banknotes is the hunt for those serial numbers that are unique, special and in some cases highly sought after by collectors. Finding the right one can add a vast amount of worth to your banknote portfolio. Banknote serial numbers do have unique serial numbers in each country.  Some serial numbers are far more interesting, hard to find and therfore certainly worth collecting.Here are some examples of what you should be looking for.

Small numbers : 000003, 000008, 0000033, 0000088, etc
The lower to '0' the better.
Solid numbers : 000001, 333333, 888888, 1000000, etc.

Chinese Lucky numbers : 000328, 328328, 000168, 168168,  300000, 800000, 088888, 188888, 288888, 388888, 688888, 788888, 988888, etc. Numbers have always held special significance for luck to Chinese people. No. 8 probably being the most passionately sought after.

3 Stripes : 111777, 777111, 222444, 444222, 666999, 999666, 777333, 333777, 555888, 888555 etc.

Ladders : 012345, 543210, 456789, 987654 etc. The numbers are incremental or decremental in a continuous sequence.

Paired Ladders : 778899,112233, 445566, 998877, 665544 etc.

Repeated numbers : 119119, 664664, 070707 030303 151515, 232323 etc.The first 3 numbers are repeated again

Radar : 050050, 161161, 488884, 520025 , 045540 etc. This where the numbers same from right-to-left as it does from left-to-right.

Same number with Different prefixes : SAB00038 & SAC00038, AB04145287 & AC04145287

Special events : Some collect banknotes with numbers 001953 if they were born in 1953 or with 021953 if they were born in February 1953. This is a more of a personalized type of special-numbered note.

Combined numbers : 006606, 066000, 066660, 606666, 660666, 666066, Etc. In essence the numbers are a combination of only 2 or 3 digits.
Rotator numbers : 988886, 089680, 069690, 068890, 096690 etc. These numbers read the same after rotating upside down. They can contain only the numbers 0, 6, 8 and 9.  Rotators which have only zeros and eights are therefore also radar numbers e.g. 080080, 008800, 088880, 800008, 808808, 880088. For notes with arabic numbers they must have only the numbers 0, 5, 7 and 8 and therefore you find 755558 converts to VOOOO^ which is in itself a rotator.

Have fun with finding your special numbers. I certainly do.

Simultan

The background of a banknote is printed flat using an offset printing process producing an effect like painting with watercolours. This stage in the note printing process is called simultan, where the coloured background design is transferred to the sheet of notes, normally both sides at the same time. Printing plates for the background colours and patterns are produced photographically. On very rare occasions this process does not fully complete and a note is produced that has no simultan.

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