Full text: Borrowing and business in Australia

ing on all sides to take a share in the good things offering. The 
‘leap-frog’ procedure then began of offering longer and longer 
terms to buyers of land. 
The next step for these institutions was to bid for the British 
deposits which were flowing into the banks in such a flood. 
Higher rates than those obtainable at the banks were offered ; 
and the drain on their deposits caused by this competitive 
bidding forced the banks in self-defence to raise their rates. To 
maintain the momentum, more and ever more capital was 
needed, and to secure this many of the institutions established 
‘agencies’ in Great Britain. Scotland, of all places, was a 
favourite field for deposit hunting; and more than a score of 
Australian companies were operating in Edinburgh alone. But 
the day was coming when this competition was to eliminate the 
unfit in the financial jungle. Haldane has said, ‘Organisms may 
develop which in one way or another are so mis-shapen or 
defective that they cannot survive even though they have all 
the essential characteristics of organisms. They maintain their 
existence as organisms for a short time, blindly struggling as it 
were to preserve the defects which make them incapable of 
surviving’! So it was to prove with the building societies and 
land banks of the time in Victoria. 
The real starting-point of the ‘boom’ lies as far back as 1881, 
when, in fact, conditions were far from favourable for such 
a development. The previous year had been remarkable for a 
circumstance that had affected every British colony in common 
with other borrowing countries. This circumstance was the 
sudden constriction in the flow of new capital from Britain, a 
flow to which the Australian colonies were by then becoming 
accustomed. Not only was the flow stopped entirely, but demands 
for repayment were made which fell so uncomfortably upon the 
ears of the borrowers as to arrest a period of budding prosperity. 
The cause of the change was another financial crisis in Great 
Britain associated, as we have shown, with the unexpected 
failure of the City of Glasgow Bank. As a direct result of the 
succeeding credit restriction the allowance of capital from Great 
Britain to the eastern colonies of Australia was cut down by not 
less than £10,000,000, and other colonies fared similarly. The 
trade statement below will show the total and individual effects 
J. B. 8. Haldane, Mechanism, Life, and Personality, p. 102.

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