THE PRELUDE TO THE COLLAPSE OF 1893 51 
deposits were usual in the two communities. Deposits in English 
banks were mainly at short call; whereas in Australia the 
custom had grown up of accepting these mostly for fixed 
periods. 
Another important feature of the situation which must be 
stressed was the change in the position of the banks during the 
period with regard to imported capital. In 1880 only a small 
part of the deposits of Australian banks consisted of British 
capital ; but, after that date, the position altered very rapidly. 
The financing of land transactions, around which the whole 
financial history of the time revolves, was made possible only 
by these deposits; and the banks were practically forced to 
engage in the business by the fierce competition which arose 
between the different financial institutions. 
The immediate causes of the land boom, therefore, are to be 
found in the policy of the banks and in the over-anxiety of the 
British speculative investor. There is a traditional difficulty 
in distinguishing between speculation and investment; but, 
broadly considered, the capital which came to Australia during 
the period was for both purposes. The capital borrowed publicly 
was at least sunk in some constructive work in the hope that it 
would be reproductive, and reached the country largely as 
capital goods. The invested or speculative capital was contri- 
buted wholly from private sources, and could come in no other 
way than as consumers’ goods, largely of the luxury type, since 
the volume of the capital flow was so great that it could not 
possibly be used in productive ways. Its diversion to speculation 
was inevitable, even if that were not the original intention ; and 
the ‘boom’ was, in effect, a period during which the eastern 
colonies were living upon English capital. We shall see that, 
as the industries of the country declined in relative productive- 
ness, the country found it increasingly difficult either to pay 
the interest or to repay the principal. 
Another remarkable feature which calls for mention was the 
origin and growth of the building societies. The Friendly 
Societies Act in Victoria helped the promotion of these in- 
stitutions, and under its shelter many companies were formed 
which were simply organizations for land speculation. The 
friendly societies had found that land dealings were an exceed- 
ingly profitable business, and very soon companies were appear-