54 THE PRELUDE TO THE COLLAPSE OF 1893 
Steady progress in the agricultural and pastoral industries, 
culminating in a splendid harvest and an exceptional wool clip 
for all the eastern states in 1882, was now checked by the 
drought which affected the seasons of 1884 and 1885.1 This had 
no effect, however, upon the buoyant conditions, since the flow 
of British capital was now so copious that Victorian bankers 
were forced to discourage its accumulation. Since pastoral and 
farm properties were no longer attractive as investments 
owing to the protracted drought, speculation now took that 
remarkable turn towards mining and town properties which was 
to be maintained till the close of the boom period. The serious 
fall in prices? for primary products that was mentioned earlier 
was balanced, to some extent, by a decline in the price-level for 
imports; and these fluctuations under ordinary circumstances 
would have had a depressing effect upon business of all kinds. 
In fact there was a temporary decline that caused some alarm ; 
but the lavish expenditure of loan money by all the governments, 
together with the increasing stream of overseas capital, main- 
tained an extraordinary buoyancy that even poor seasons could 
not depress. 
By this time the excessive competition among the financial 
institutions was producing conditions so menacing that the 
more soundly based concerns took alarm. The older banks, 
however, were unable to agree upon a policy that would be 
adequate under the circumstances, although a new association 
was formed with the object of controlling interest rates. A far 
more urgent problem, in view of the influx of capital, was that 
presented by the exchange rates; but with this the Australian 
bankers were quite powerless to cope, since it arose from the 
great volume of funds in London awaiting transfer to Australia. 
This situation, of course, reacted to the financial discomfort of 
exporters who, as the only people who were doing anything 
towards maintaining the solvency of the country, were the very 
people to be directly penalized by the unfavourable exchange 
rates. 
The return of good seasons, and a slight recovery in the price 
of wool, set the ball rolling as merrily as ever in all the capitals. 
! See Harris, op. cit., p. 14, for the effect of the financial situation upon the 
pastoral industry. 
2 See Coghlan, Wealth and Progress of New South Wales, 1897-8, pp. 133 and 
1071, for an analysis of the price situation.