Businesses across Australia will be forced to accept cash from customers for essential items such as groceries under a government mandate.

Some 1.5 million Australians use cash for more than 80 per cent of in-person payments.

Although about 94 per cent of businesses accept cash, Treasurer Jim Chalmers said it had fallen from 99 per cent before the Covid-19 pandemic.

The focus would be on essential items sold at places like supermarkets, pharmacies and petrol and there would be carve outs for small businesses, Chalmers said.

“We’re making cash an ongoing feature of our economy even as we modernise the payment system,” he told ABC TV on Monday.

“That’s because we understand that for a lot of people, cash is a lifeline. It’s a backup. It gives people security and peace of mind.”

Treasury will commence consultation before the end of the year on which businesses supplying essential goods and services should be covered by the mandate.

The consultation will consider the needs of those who rely on cash, including people in regional areas and those unable to use digital payments, as well as the impact on small businesses.

Final details of the mandate – set to begin from January 2026 – are to be announced in 2025.

A move to phase out cheques will also begin under a Cheques Transition Plan, giving customers and businesses until 2029 to adjust to alternative payment methods.

Under the plan, cheques will stop being issued by June 2028 and stop being accepted by September 2029.

Use of cheques has declined by 90 per cent in the past 10 years and many banks and financial institutions are ending cheque issuance for new customers.

Chalmers said there was a focus on regional Australia under the changes.

Asked about a proposal for a bank levy to promote branches staying open in regional Australia, he said his department was “trying to maintain a decent level of access and services for Australians who live in the bush”.

“It’s no secret that the decline of banking services in the regions is a challenge for a lot of Australians,” he said.

“It shouldn’t surprise people to hear that we engage pretty regularly with the banks and with others to try and find some solutions here.”

-AAP