OVERSEAS TRADE AFTER 1890 95 
the situation does lend some colour to the belief that the banks 
were largely responsible for undue expansion of credit in con- 
nexion with land transactions; and this is to be observed in the 
excessive advances. The Australian practice in the matter of 
granting overdrafts, and the customary use of cheques, readily 
lent themselves to an inflation of this type. The relatively low 
level of the ratio of reserves to deposits is a reliable indica- 
tion that the superstructure of credit was expanding at a faster 
rate than the growth of the gold basis warranted. 
The effect of excessive capital importation upon gold move- 
ments has also a particular bearing upon the matter under 
discussion. Theory would predict that the normal flow of gold 
from Australia to Britain, which was a consequence of Australia’s 
Tare XVII 
Stocks, Production and Movement of Gold! 
(In Millions of Pounds Sterling) 
Year. 
1886 
1887 
[888 
889 
£890 
1891 
1892 
1893 
1894 
18956 
i896 . 
Stocks. | Production. | Export. 
81-53 
86-09 
94-89 
97-60 
102-92 
103-16 
103-37 
100-13 
89-99 
39-39 
21-90 
4-5 
4-8 
4-8 
5-9 
5-3 
5-3 
6-0 
6-2 
6 
76 
7.8 
2-020 
1-367 
£507 
4-456 
3-730 
5-108 
3-696 
1-956 
4-161 
4-407 
5-091 
Gold retained. 
2-568 
3-568 
0-411 
1-436 
1-474 
0-295 
2-628 
4-632 
3-006 
2-516 
2.017 
position as a gold producer, would be retarded; and that an 
abnormal proportion of the gold yield would be retained in the 
country. Not all of the capital introduced into Australia could 
come in the form of commodities; part took the form of an 
increase in reserves, since some of the gold that would normally 
have been exported was retained. In addition, a very large pro- 
portion of the loans was diverted to Australia from other fields of 
investment, and for no other purpose than that of speculation in 
land. We can expect, therefore, to trace the effect of capital 
importation in retarded gold movement, as well as in a tendency 
for the ratio of imports to exports to increase; and the figures 
L Coghlan, Statistical Account of Australia and New Zealand, Reports of the Royal 
Mint, and Commonwealth Bureau of Census and Statistics, Finance Bulletin No. 11.