Full text: Borrowing and business in Australia

a separate colony in 1859, really before it was ready to stand on 
its own feet. The leader of the first government found himself 
with an empty treasury, and saddled with a debt of nearly 
£40,000 to British creditors. This in itself was not very serious, 
but neglect of the ordinary canons of sound government finance 
made it so. The revenue of the day was not nearly sufficient for 
a comprehensive system of public works, and borrowing was 
resorted to for the purpose. A loan of £700,000 was floated in 
London, and so easy did the process prove that a request was 
made for another million in the following year. 
The ease with which the money was obtained was due partly 
to the fact that in that year no less than twenty-eight new banks 
had been established in Britain with a total capital of £34 millions, 
of which a proportion was ear-marked for colonial investment. 
The young community was intoxicated with this ‘easy money’, 
and the government expenditure jumped at a bound from half 
a million to one and a quarter million pounds. Nor does this 
comprise the full tale of unwise financial methods. The common 
device of charging revenue expenditure to loan account was 
employed, and the position thus camouflaged. 
The amount borrowed was even yet not sufficient to cover the 
ambitious schemes of the government ; and a new loan bill for a 
million sterling, mainly for railway construction, was passed.l 
By this time the Union Bank authorities had taken alarm at 
the frequent recourse to the money-lender, and they refused to 
advance any further on such security as the colony could offer. 
In this difficulty the government accepted the offer of the Agra 
and Masterman’s Bank to float a loan and grant accommodation 
up to £500,000. 
The increasing dependence of Australian finance upon the 
British market is vividly illustrated by the events which 
followed. The few years prior to this had been marked in Britain 
by the number of new companies formed under the provisions 
of the Joint-Stock Companies Act of 1862,2 when for the three 
years following an excess of new issues was thrown on the 
London market by no less than 3,480 companies, many of them, 
as the Master of the Rolls scathingly observed, ‘started for the 
i In 1862, 368 miles of railway were open for traffic in Australia. 
? The yearly issues under this Act were as follows: 1863, £100 millions; 1864, 
£154 millions; 1865, £107 millions.

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