32 PROSPERITY AND CRISIS AFTER 
sharply in the first phase ; but, later, as the supply overtook the 
demand, fell disastrously. The trade advantage in the first 
stage thus moves against Australia, a reaction exactly the 
opposite of that which occurs in the first phases of borrowing. 
(ii) Home Trade Commodities capable of being produced within 
Australia, the supply of which could be rapidly increased, e.g. 
farm and garden produce. Prices in this group also exhibit a 
great rise and fall ; but the changes are not so marked as in the 
first group. (iii) Other Home Trade Commodities, i.e. not capable 
of great expansion in supplies. Prices for this group rose higher, 
and the rise was maintained longer, than for all other com- 
modities. 
Although, in the main, this increase was transitory, it can safely 
be said that the whole range of prices was left at a higher level 
after the crisis than it had occupied before the gold discoveries. 
Of greater interest and importance than the measurement of 
this general lift in the price level, however, are the conclu- 
sions at which Tooke and Newmarch arrive from a study of 
the effects of the great increase in gold supplies, not only 
upon trade and wages in Australia, but also in Great Britain. 
The expansion of manufacturing in response to the stimulus of 
increased demand in Australia was sufficiently marked to cause 
a rise in both prices and wages in Great Britain. This was, of 
course, no more than was to be expected because of the increased 
demand for labour in all industries, on the one hand, and the 
increased supply of gold on the other, changes that were con- 
sequent, of course, upon the withdrawal from Australia of the 
accumulated quantities of new gold in payment for the importa- 
tion of goods and services. In short, the total effects, as stated 
broadly by Tooke and Newmarch, are scarcely to be distin- 
guished from the effects of great capital loans in that ‘there 
was set in motion a train of causes which has led rapidly to the 
diffusion of new gold and to the production of commodities 
supposed to be required in Australia’! 
The production, in particular, of one commodity demanded 
in Australia is worthy of special notice, viz. the capital goods 
required for the construction of railways. The rapid increase 
of population, the great expansion of purchasing power in the 
! For the effect of the increased gold supply after 1850 upon world prices and 
industry see Tooke and Newmarch, History of Prices, pp. 188-236.