Full text: Borrowing and business in Australia

CRISIS OF 1840-3 11 
The check to expansion was aggravated by a drought which 
held the colony in its grip for nearly two years after the summer 
of 1827, and this necessitated the importation of large quan- 
tities of grain from Van Diemen’s Land,! thus intensifying the 
depression in the later stages. But the speculative abandon 
continued unchecked for some time, during which the community 
was financing itself on bills. ‘At length, however, the evil day 
arrived: the bills which had been circulated in the speculation 
of purchases in stock fell due and had to be paid. Buyers and 
sellers, when they came to press each other, found how delusive 
had been their speculations. Credit was shaken, confidence 
was lost, and a panic ensued.’? 
As events proved, however, this boom and crisis was but the 
Prelude to a far more serious and extensive disaster ten years 
later; a disaster, furthermore, which was marked by exactly 
the same features of capital importation, credit expansion, land 
Speculation, and neglect of industry. The granting of self- 
government to New South Wales had the double effect of 
directing the attention of British capitalists to Australia and 
of stimulating speculation in that country. This was the 
moment chosen by the Imperial Government to raise the mini- 
mum price of land, and there can be no doubt that this 
action helped greatly to strengthen the confidence in the 
young colony. The apparently unlimited extent of the land 
offered for sale at such a seemingly low price was the morsel 
that proved too tempting for British investors. Tt is recorded 
that ‘the land-office on a sale day resembled some of the 
London “bubbles” of last century’. To cope with the boom 
finance two banking companies were established with a total 
capital of 1} millions sterling, and through these institu- 
tions large sums were invested in Australian mortgages by 
British investors. 
Nor were the settlers themselves at all behind in the business 
of land speculation. It is difficult at this distance to appreciate 
the ardent faith of the colonists and investors in the future of 
the colony, isolated and undeveloped as it was then. Only the 
ager overseas competition for Australian agricultural and 
! These imports indicate the position Tasmania then held as ‘the granary of 
Australia’, Exports from the island to N.8.W. totalled £54,838 in 1828 and £42,640 
in 1829. ? Braim, op. cit.

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