Full text: Borrowing and business in Australia

of the British investor, and had thus effectually pricked the 
bubble of speculation in the eastern colonies. Further, it was 
also the area where the distress consequent upon the stoppage 
of capital supplies was felt most keenly. When, in May 1841, 
Grey superseded Gawler in the government of the province, he 
carried instructions from the Colonial Office ‘to economize the 
revenue in every possible manner in order to obtain some surplus 
which might be available as interest on the debt’—a paltry 
sum, by the way, of less than £200,000. For the stern régime of 
retrenchment which ensued Grey proved himself an efficient 
instrument. As he represented the direct control of the Colonial 
Office, he was bound by none of the promises of the previous 
administration; and he felt free to repudiate his predecessor’s 
debts in a wholesale fashion. The Wakefield theory was entirely 
abandoned, and a sweeping reduction made in every government 
service. Expenditure was decreased from £170,000 in 1840 to 
£32,000 in 1843, and the revenue was increased very consider- 
ably. A sudden fall in imports and a sharp decline in prices 
helped this policy of retrenchment; but the immediate result 
was ‘a sudden and violent crisis affecting all classes of the com- 
munity’. Grey noted in his dispatches that ‘the cessation of 
government expenditure was as if a capital of £1,500,000 had 
been suddenly withdrawn from the province, and that every one 
who lived on the profits made from the employment of this 
capital was thrown out of his ordinary pursuits and occupa- 
tions’! Merchants found themselves stranded, contractors 
were unable to carry on ; some, indeed, filled the role of creditors 
to the bankrupt colony. The blow fell hardest upon the working 
classes concentrated in Adelaide. Grey dismissed 215 out of the 
385 persons employed by the state, and by the end of 1841 the 
unemployed numbered 2,427, or one-sixth of the whole popula- 
tion. Including their dependants it was estimated that 60 per 
! Price, op. cit., quotes some interesting facts concerning this crisis. In Adelaide 
842 out of the 1,915 houses in the town were empty; and 216 were abandoned 
entirely and falling into ruin. Public houses were reduced from 63 to 38, but there 
are no figures representing their re-establishment elsewhere. Municipal government 
shared in the general disaster ; and the furniture of the corporation offices was seized 
for debt. Wages fell from 25 to 50 per cent., and the cost of construction fell even 
more than this. A second crisis was induced by Grey's decision to pay off the remain- 
ing claims on the government, totalling £14,000, by means of bills; but his action 
was repudiated by the home authorities, with some biting references to his instruc- 
tions and his failure to observe them.

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