28 PROSPERITY AND CRISIS AFTER 
way that was to have momentous consequences thirty years 
later. So far the banks, while not forgetting the experiences of 
1843, had taken the view that their function was to assist 
primary industries as the mainstay of the country; but, in the 
unusual circumstances of the time, the emphasis in their 
activities ‘had been laid rather upon mercantile transactions. 
From the end of the crisis onwards a very much closer connexion 
between banking and rural industry developed that will call 
for more attention at a later stage. 
That the banking situation was far from satisfactory is to be 
gathered from the comments of the bankers themselves. The 
chief difficulty of the time was the lack of coin for buying gold 
on the fields or through merchants’ drafts as the bullion was 
shipped. One writer says: 
‘The energies of the printers and the hands of the bank officials were 
pretty well taxed in the preparation of bank-notes the circulation 
of which was multiplied with astounding rapidity; but this only 
mitigated the public inconvenience without supplying the want of 
coin, and it was not long before the banks found it necessary to 
purchase gold on their own account and to hold it as a metallic 
though not as a legal tender basis for the notes they issued.’2 
The economic consequences following the sudden introduction 
of such huge supplies of gold into the community are of such an 
extraordinary character, and bear so closely upon our general 
theme, that a more accurate statement of the course of events 
is necessary. In all its essential features the expansion of the 
gold supply after 1851 amounted to nothing less than a sudden 
' Edwin Brett, History and Development of Banking in Australasia. Paper before 
the Bankers’ Institute, 1882. 
® The comment in Tooke and Newmarch, History of Prices, is of interest here. 
Statistics for N. S. Wales, Victoria, and South Australia: 
Year. | Population. 
Note Circulation. 
Cash Reserves. 
1850 | 
1856 
£ £ 
220,000 450,000 | 930,000 
695,000 4,300,000 7,720,000 
Population three times, Note Circulation nine times, Specie Reserves eight times as 
great as in 1850. ‘We arrive at the startling conclusion that, in the space of five 
years, the transactions of about 700,000 inhabitants in Australia have become so 
large as to require a currency of not less than about 14 millions sterling. These 
figures will enable us to understand why the 12 millions of gold coin exported from 
Great Britain to Australia in 1852-3 have almost wholly remained there.’ (Vol. vi, 
Appendix XXX, p. 773.)