THE COMMONWEALTH, 1900-14 113 
other gold-using countries ; but the policy is more than usually 
dangerous owing to our peculiar sensitiveness to derangements 
of world credit. The key to this situation, as indicated by 
Professor Copland, lies in the tendency for bank policy in 
Australia to be regulated by the size of funds held in London 
by Australian banks. The connexion between bank policy and 
the rate of exchange in Australia, and the balances of loan funds 
in London awaiting transfer to Australia, is sufficiently obvious. 
That it has been a very persistent factor in our financial relations 
with London, and still influences, perhaps unduly, our bank 
policy cannot be doubted ; and it constitutes the greatest weak- 
ness or the greatest strength of our financial system, according 
to the two opposing schools of thought on the subject. 
But to return to the history of the period. The year 1909 
was one of the most remarkable of the period for many reasons; 
but the chief of these was the rapidity of the revival which now 
took place. The 1908-9 wool season was ‘one long succession of 
pleasant surprises’; and it was, doubtless, due to the recovery 
of the wool trade that business so quickly took on a sanguine 
tone. By the middle of the year the country was again moving 
on to prosperity with easier monetary and more active invest- 
ment conditions. Every state enjoyed a splendid season, wheat 
and wool prices were high and metal prices improving, while 
industry was quickening everywhere. These circumstances 
formed the chief justification for a big series of loan issues for 
developmental works. 
But, in order to understand the phase of prosperity which 
now commenced, the vigorous world developments of the period 
must be considered. A great outburst of investment took place 
which involved all the primary raw materials, especially wool, 
wheat, cotton, silk, and rubber. Australia’s position in the face 
of this increased industrial demand was most favoured. A wave 
of prosperity ensued which swept the country along with it 
until 1913. The two features which stand out most prominently 
in our economic history at this time were, first, a remarkable 
increase in prices which affected Australia in common with 
the rest of the world ; and, secondly, the growing burden of the 
public debt. Reserving the matter of the public debt for the 
next chapter, we must consider the movement of prices a little 
further. It will be remembered that since 1850 prices had 
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