AND THE CRISIS OF 1878 41
in Victoria, there would have been no land boom and no de-
vastating catastrophe in 1893.1
The developments we have outlined effected peculiar changes
in the status and policy of the banking institutions, changes
that had an unusual significance in their relation to overseas
trade. Melbourne and Sydney merchants, whose overseas
transactions had exceeded their individual resources, became
more and more dependent on the banks for working capital.
Australian bankers, whatever be the justification for the
development, ‘thus assumed in addition to the ordinary
business of banking that of trading in wool and other merchan-
dise. In the circumstances this was their legitimate business,
but when some of the banks later on, having more money than
they needed, sent out millions for investment, and especially
when they lent it to speculators, the business was, to say the
least, hazardous.’2
Public finance, too, was unsatisfactory and troublesome from
1860 onwards. The old, old difficulty of scaling down the in-
flated expenditure of boom times to accord more comfortably
with diminished revenues was the stumbling-block. It is not
to be wondered at, therefore, that borrowing for public works
assumed larger and larger proportions as the period progressed.
After the recovery from 1857 the English capitalist was still
anxious to invest, but a series of unhappy shocks at the worst
moment made him very shy of the Australian colonies as a
receptacle for his savings. The first of these was the uneasy
banking situation in general, and the second the inopportune
‘action of the United States in repudiating its liability to repay
its loans in specie’ with its implication that the same course
was open to Australia. Climatic adversity and poor seasons, a
blight to which Australia for some years seemed peculiarly
liable, constituted a third reason for hesitation. As a further
deterrent no state had yet produced a man of outstanding
capacity in finance despite the obvious needs of the case.
The incident of 1866 concerns Queensland more nearly than
any of the other colonies.3 The northern settlement had become
1 The best general summary of Australian development in this period is contained
in Coghlan’s Statistical Account of Australia, section on Industrial Progress, pp. 460
ef seq. 2 Coghlan, op. cit.
% For a full history of the Queensland trouble see Coghlan. Labour and Industry,
pp. 1170 et seq.
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