What Was the Christmas Island Dollar?
The Christmas Island Dollar was the official currency of Christmas Island, which is a small Australian island located in the Indian Ocean. The currency became obsolete after the island became an Australian territory. As such, the island uses the Australian dollar (AUD) as its currency. Christmas Island is known for its phosphate mines. It was discovered by a British captain named William Mynors, who sailed by it on Dec. 25, 1643.
- The Christmas Island dollar was the official currency of the Pacific Island, Christmas Island, which was at various times a territory of Great Britain and Singapore.
- The Island became a part of Australia and adopted the country's currency in 1958 in a process called dollarization.
- The island's name is derived from the fact that it was discovered on Christmas Day 1643 by a British sea captain.
- Christmas Island has just over 2,000 residents with an economy based on tourism and phosphate mining.
Understanding the Christmas Island Dollar
The Christmas Island Dollar is now an obsolete currency. As such, it is no longer in circulation or in use. The island began using the Australian pound as its currency when Australia purchased the territory in 1958. In 1966, Australia replaced the pound with the Australian dollar as its official national currency.
Britain annexed Christmas Island in 1888. After World War II, Christmas Island became a jurisdiction of Singapore, until Singapore transferred the island to Australia in October 1958 for a payment of $20 million to cover the loss of earnings from the island's phosphate supply.
Christmas Island had an estimated population of just over 2,200 people, mostly inhabiting the north side of the island. A significant portion of the island’s population comes from Chinese ancestry, followed by Australian and Malay ancestry.
The island's economy consists primarily of tourism and a phosphate extraction industry that is dwindling.
More than two-thirds of the island is a national park. The island also houses an Australian immigration detention center.
Christmas Island Dollar vs. Australian Dollar (AUD)
The legal tender on Christmas Island is the Australian dollar. It's been as such since it became an Australian territory. The Australian dollar is made up of 100 cents and is represented with the symbol $, A$, or AU$. It is also the official currency for the Pacific islands of Nauru, Tuvalu and Kiribati, as well as Norfolk Island.
Australia is the world’s 13th-largest economy. Its economic and political stability makes its currency highly traded, as the Australian dollar is the fifth most traded currency in the world.
The switch from the local currency to the AUD is called dollarization or currency substitution. Christmas Island is one of many regions that experienced this process. Others include Zimbabwe, Ecuador, and El Salvador.
Dollarization commonly occurs in developing countries with unstable economies or weak central governments. The process provides regions with economic stability, attracts domestic and foreign investment, and has the ability to counter high inflation. Dollarization can either be a partial or full process. When partial dollarization takes place, a portion of a country’s assets is held in the adopted foreign currency.