AUSTRALIA PRIOR TO 1893 77
in the ratio between reserves and deposits of the banks. The
decline from 34 to 19 per cent. over the whole period, a shrinkage
of 45 per cent. in the margin of safety, is too significant to be
misunderstood ; and the drain of gold for export to restore the
equilibrium of the exchange retarded the recovery towards the
end. The connexion between borrowings and bank credit, and,
hence, the decline in prosperity, may be regarded as conclusively
demonstrated.
To revert to the main topic again, it now becomes necessary
to examine a little more closely the extent of Great Britain’s
financial interest in Australia as represented by public and
Private securities.! In 1887 the Economist published an estimate
 of Australia’s indebtedness to Britain at that date, and
of the increase in the debt since 1883. This covers almost
exactly the period of greatest loan activity, and the statistics
covering both public and private debt are shown in concise
form in the following table.

Tae IX

British Investments in Australia
{In Millions Sterling)

Victoria . .
New South Wales
South Australia .
Queensland “
Tasmania . ”
Western Aunstralia

ToTAL .

1883. | 1887.

£ £
50 87
48 kd
22 30
23 36
6-3 &
1:5 :

160-8

29°.

INOREASE.

Total.

Per cent.

£
17
29
R

34
60-4
36
56
60
[0

47-6

It will be seen that, during the five years, the burden of indebtedness
 had increased by approximately 50 per cent.; and it is
also of interest to note that, during this period in which Britain

! Hobson, Export of Capital, p. 42. ‘About 1874 a series of defaults in foreign
countries made intra-imperial investments appear much more attractive. About
that time & number of American railroads defaulted’ (for about £40 millions).
‘This, and the fact that the prevailing price of wool made the future of the pastoral
industry seem full of promise, turned the flow of capital in this direction.’ — Harris,
op. cit., p. 6.