26 PROSPERITY AND CRISIS AFTER 
motion was the adverse state of the exchange with Europe due 
to the excessive imports. The banking companies had long 
realized the power that possession of large gold supplies had 
over the rate of exchange, but the fierce competition in gold- 
buying had, by now, forced on the extension of banking branches 
and facilities beyond all reason. The wonderful opportunities 
for banking profits formerly existing had now vanished. But 
through this very competition the miner was at last able to get 
full value for his gold. Storekeepers, contrary to their earlier 
experience, now found that the miner could call the tune and 
name the dance. Dealers everywhere were compelled to lower 
prices ; and also, since a drought was beginning to affect washing 
operations, they were now forced to extend credit. These events 
compelled a corresponding change of attitude on the part of the 
merchant and banker. The high-handed and cavalier methods 
of banking and finance of the ‘gold rush’ were now gone for 
good.1 
Other causes, too, were working to call the bankers to account. 
The excessive imports of the last few years had generated sus- 
picion in the minds of the English merchants, who were now 
becoming concerned over the fate of their speculative shipments. 
Pressure was brought to bear by both the London and ‘Colonial’ 
banks in Australia upon the speculators to whom they had been 
willing to lend such a short time ago.? Many of these so-called mer- 
chants were but financial adventurers devoid of capital ; and, when 
the pressure was applied, bankruptcies followed one another in 
quick succession. The usual phases of business depression then 
occurred in rapid sequence—stagnation in building and en- 
gineering, restriction of bank credit, contracted trade, falling 
prices, particularly of imported commodities, and widespread 
admitted of beingimported ; and, whatisespecially to benoted, among the things thus 
imported were many which she could have produced herself at far less cost.’ — 
Leading Principles, p. 312. 
1 Gains made by the banks in buying gold, issuing notes,and ordinary banking 
tempted others into the field and three new companies began business as bankers 
at this time, i.e. Australian Joint Stock, London Chartered, and the English, 
Scottish and Australian. The effect of the competition thus engendered was most 
marked. Accommodation was more readily obtained, discount rates on local bills 
reduced, interest was paid on deposits, and mortgages increased rapidly. (Coghlan, 
p. 855.) 
? By 18556 there were five joint-stock banks with head-quarters in London, 
i. o. Australasia, E. 8. & A., London Chartered, South Australian Banking Co., and 
the Union.