While Aussies have been busy buying up big on toilet paper, the Federal Government has been working on a new piece of legislation that may have a very substantial effect on investors if enacted. After being endorsed by the Labor government in the House of Representatives last year, the Senate Economics Legislation Committee recommended the bill be passed last week. 

The "Currency (Restriction of Use of Cash) Bill 2019" has been introduced on the premise that Australia has to crack down on the 'black economy' by making it illegal to use cash for transactions over $10,000. 

The legislation proposes a $25,000 fine and two years jail for those who breach the new rules.  The legislation will allow the government to change the quantum at their discretion (meaning that over time, the $10,000 limit could be reduced to any number in the future). 

What are the implications of this?

The net effect of the legislation is that it will move Australia towards a cashless society. 

The biggest winners of this legislation would be the Big Banks who would be able to charge depositors to hold their money in the bank in the event that negative interest rates become a part of the economic toolbox of our regulators.  This could amount to a trillion-dollar boost for banks who have been licking their wounds on the back of the Royal Commission. 

The International Monetary Fund has already noted that negative interest rates may be required in the near future for global economic stimulus.

Cash transactions have been falling in Australia in recent years, in any case, so this legislation appears to be more of a tool for monetary policy to stimulate the economy going forward. Negative interest rates would only work if Aussies were forced to use the bank to hold cash. The policy aim appears to be to motivate people to spend their money, as opposed to save their cash. 

There are five Central Banks already with negative interest rates – the eurozone, Japan, Denmark, Switzerland, and Hungary. Although the Reserve Bank of Australia (RBA) governor Philip Lowe has said that it's unlikely that Australia will need to stimulate the economy with negative interest rates, this legislation does pave the way for the RBA to entertain unconventional policies. 

How did the bill originate?

This controversial legislation was originally proposed by KPMG, which suggested that small businesses in Australia are avoiding $7 billion in taxes. According to KPMG, it's tradies, hairdressers, nannies, gardeners and personal trainers who are evading their obligations who are the cause for this legislation. 

However, a public hearing in Sydney on 30 January 2020 determined that the biggest tax evasion in Australia has nothing to do with cash payments whatsoever. 

South Australian Senator Rex Patrick presented to the legislators 204 companies across Australia who over the last 5 years have generated more than $800 billion of revenue and not paid a cent in tax in that timeframe. The Senator mentioned a range of companies that have paid no corporate taxes over the past five years in spite of their vast revenue, including; Amcor Plc (ASX: AMC) $16 billion, Exon Mobile $42 billion, Ford $14 billion, and Vodaphone Hutchinson Telecommunications (Aus) Ltd (ASX: HTA) $18 billion.

The Senator went on to say that most Australians would find this situation unacceptable and he requested that the Tax Office to review the large end of town to assess whether the correct tax has been collected.   

At least 2,640 submissions against the legislation have been submitted to the government to date, however, the regulators have so far been unmoved by the concerns raised by every-day Australians. 

New Zealand has recently rejected cash-ban laws on the back of average Kiwis rejecting the loss of access to cash transactions with the associated loss of privacy and autonomy that this may involve. 

Foolish takeaway

The "Cash-Ban" legislation currently before the Australian Parliament is being proposed as a solution to the Black-Economy but in fact, appears to be a monetary tool for the government to boost the economy. The big winners will be the Big Banks and the big losers will be savers and those on fixed interest incomes.    

The post Controversial cash payment ban bill could see you paying the banks to hold your deposits appeared first on The Motley Fool Australia.

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Motley Fool contributor Margie Baldock has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Investment success is primarily an exercise in managing emotions and so facing the threat of a global pandemic offers a great test of our commitment to our long-term investment game plan.

While the novel coronavirus is a serious matter for those infected, it is important that we don't let fear become overblown and cause us to make reactive short-term investment decisions that we may regret later on.

Last week I travelled to Singapore and Malaysia on business and found myself flying on virtually empty jumbo jets.  It felt surreal, and even a little bit eerie to see so few fellow passengers passing through these normally bustling airports.  There is no doubt that in the short term the coronavirus is having a massive impact on the revenue of airlines, tourist operators and international education. 

And while it makes sense to limit non-essential travel in the short term, we must remember that the virus is really only a serious threat to immune-compromised individuals. That is not to downplay the tragic, global health crisis that coronavirus represents but if those who are at risk in the face of this virus take sensible precautions to quarantine themselves from harm, then the majority of people should be safe to go about their ordinary business. 

According to NSW Chief Health Officer Dr Kerry Chant, 80% of people who get the virus will only have mild symptoms and it is predominantly people over 60 who have compromised immunity who are at the most serious risk with this particular virus. 

Lessons we can take from the past

While we all need to be cautious, it's safe to assume that life will go on pretty much as usual, as it has done after the vast majority of previous global disease outbreaks.   

According to the World Health Organisation, 3,119 have died to date from the Coronavirus out of 90,932 diagnosed cases, which is an approximate death rate of 3.4%.  It's not the first time we've been through this challenge – we had the Bird Flu in 2013, MERS in 2012 and H1NI which killed up to 203,000 people in 2009.  And then there is the annual seasonal flu which kills between 291,000 to 646,000 people every year. And in spite of all these challenges, economies have continued to do what they do.  

The All Ordinaries (INDEXASX: XAO) fell almost 10% last week wiping out most of the previous year's gains with losses of almost $200 billion.  Markets don't drop 10% or more in a few days very often.  In fact, it's happened just 14 times to the Dow since 1928 according to US-based research firm Evercore ISI data.  And in each of these cases, there has been a pretty quick bounce back thereafter.  While some of that lost ground has already been regained this week confirming this trend, it's impossible to predict the precise bottom in any of these market shocks, at least until we have the benefit of hindsight (sometime down the track from now). 

And while we can't know what is going to happen in the future, history has proven that most market corrections of this nature, especially in the absence of a general recession, tend to prove to be good entry points for share market investor.

It is wise to assume that this current crisis is no different to all the countless crises that have come before it, and the many future crises that we are yet to face. With this approach, each crisis could be viewed as a chance to pick up your favourite businesses while they're "on sale", boosting capital and cash returns as the animal spirits calm down and life returns to normal. 

Foolish takeaway  

Remember the Foolish way to invest is to develop a long term game plan and stick to it regardless of short term crises along the way.

Thinking with a 3-5 year time horizon will help you ride out short term noise that can distract you from the end-game.

The post To panic or not to panic? A Foolish approach to the coronavirus and share market investing appeared first on The Motley Fool Australia.

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Motley Fool contributor Margie Baldock has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.