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Australian Constitution, Confiscation and Gold

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Published : November 28th, 2008
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Category : Gold and Silver





I have amended the confiscation blog with the text below and posted it here for those who have already read the blog so you don't miss it.

What if Western Australia did not want to secede or there was not enough public support to do so, but still wanted to stop gold confiscation by the Federal Government. One possibility is for the State to make gold coins legal tender. They would therefore cease to be just gold and become currency.

Section 115 of the
Australian Constitution states "A State shall not coin money, nor make anything but gold and silver coin a legal tender in payment of debts." I interpret this as a State shall not coin money, period, but can make (with "make" as make law, not "manufacture") gold and silver coin legal tender.

Now if a State cannot make coins, how does the Perth Mint get away with it. It does so by going to the Treasurer and getting approval to do so under the
Currency Act 1965. With the Mint's gold and silver coins, as well as sovereigns, already out there could not a State pass a law to make those gold and silver coins legal tender at their market value, not face value? Interestingly, there is no definition of "coin" so maybe sovereigns and Eagles and Maples could be included, although coin usually means "legal tender" otherwise it is a "medallion".

According to this
Wikipedia entry, "Section 51(xii) of the Australian Constitution gives the Commonwealth Parliament the right to legislate with respect to “currency, coinage, and legal tender.” with Section 51 powers able to be legislated on by the states, although Commonwealth law will prevail in cases of inconsistency. Section 115 effectively makes the concurrent power in section 51(xii) exclusive to the Commonwealth. Despite this, coins of the Australian pound were not introduced until 1910. From 1901 to 1910 the states could not issue tender and the Commonwealth had not issued tender, so private currency was used as the common medium of exchange whilst the British pound sterling was the national unit of account."

This then raises the question of whether Western Australia making those existing gold and silver coins legal tender would "inconsistent" with Commonwealth law.

Part V of
Reserve Bank Act 1959 states that banks or persons (but no mention of States) shall not issue bills or notes intended for circulation as money but otherwise makes no restrictions on any other legal tender.

I have looked at the Currency Act 1965 and cannot find any section prohibiting a State from declaring gold and silver coins legal tender. Section 22 prohibits persons from making coins. Section 16 says that "a tender of payment of money is a legal tender if it is made in coins that are made and issued under this Act", which the Perth Mint's coins are.

See also the Reserve Bank of Australia's comments on
legal tender.

Therefore I see no inconsistency with Commonwealth law if a State passes a law making existing gold and silver coins (at their market value) legal tender. However, there is a catch. Section 23 states that "the Governor‑General may, by Proclamation, call in any coins issued under this Act or the repealed Acts before a date specified in the Proclamation."

So if the West Australian Government attempted to make the Mint's coins legal tender to stop the Commonwealth's moves to confiscate gold, the Commonwealth could just call those coins in.

Now while this investigation seems to have achieved nothing, it does raise one useful point - Section 23 is effectively another confiscation mechanism, but with the implication that it can be used not just to recall gold coins but also any Perth Mint silver coins. Note also that any proof/collectible coins issued by the Perth Mint are also done so under the Currency Act 1965 so numismatic coins clearly have no protection. Therefore, while coins have advantages when moving between countries due to their legal tender status, that legal tender status puts them at risk of confiscation, so one should prefer bars to coins if one is concerned about confiscation.


Bron Suchecki




Bron Suchecki has worked in the precious metals markets since 1994, when he joined the Perth Mint as an Administration Officer in their Sydney retail outlet. In 1998 he moved to Perth to work in the then fledgling Depository division. He has held a number of roles since then in the treasury, risk and governance areas of the Mint.
All posts are Bron's personal opinion and not endorsed by the Perth Mint in any way.






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