Foundations of the Australian Monetary System 1788-1851 Butlin, S. J. (1910-1977) University of Sydney Library Sydney, Australia 2002 http://setis.library.usyd.edu.au/oztexts © University of Sydney Library. The texts and images are not to be used for commercial purposes without permission Source Text: Prepared from the print edition published by Sydney University Press Sydney 1968 Reproduced with permission. All quotation marks are retained as data. First Published: 1953 332.4994/33 setis australian etexts prose nonfiction 1940- Foundations of the Australian Monetary System 1788-1851 Professor of Economics, University of Sydney Sydney Sydney University Press 1968 Preface THE story of Australian money is peculiarly fascinating for it is possible to trace its development from the primitive beginnings in a penal colony with no initial monetary arrangements through to a fully fledged modern system. This has more than its individual interest, for the opportunity to study in detail an economy built up from its earliest beginnings should throw light on the general theory of economic development. That theory, in its various presentations, presupposes a fully developed economy, of a capitalist type, and neither of its two most impressive contributions (by Marx and Schumpeter) is an exception. For the present study the year 1851 was chosen in advance as a halting point, as being the year of the separation of Victoria from New South Wales and of the discovery of gold, closely followed by the coming of responsible government. It has proved fully justified after the event, for, as the story will show, one finds development pausing in the late 'forties, different sections of the monetary system reflecting the temporary stability of the economy as a whole. In due course I hope to complete the study by tracing the development of later decades. On many points of detail material is available for a fuller investigation, and at any time lost records of individual banks may turn up to correct and fill out the account given here, but even the most relentless researcher must stop. I have elected to give my version in full detail, partly to make it unnecessary for others to rediscover the facts, but mainly because my object has been to display a set of institutions coming into being and in operation, and, on first telling, that story requires detail. The chief defect of the present narrative, if an author may give reviewers a text, is that the threads of monetary development are imperfectly woven into the fabric of the growth of the Australian economy. The explanation lies in the inadequacy of the literature. It has been necessary to search out from original sources many matters not part of the present study, but essential for its writing: the emergence of a government treasury organization; the functioning of the commissariat; the growth and changing forms of external trade; the beginnings of joint-stock enterprise generally and in insurance and pastoral companies; some specialized aspects of British colonial policy; and others on which I have learned enough to know that I do not know enough to justify facile generalizations and “interpretations”. Interpretation I have in general sought to embody in the narrative rather than present it self-consciously apart. Citations of secondary sources are mostly limited to correction of errors and then to those works whose authority and standing warrant the trouble. In particular, the frequency with which Fitzpatrick's mistakes are noted reflects my view that, while he is often inaccurate in his narrative and I cannot accept many of his interpretations, his two volumes are the most substantial economic history of Australia yet available. No doubt every researcher feels that he has found out how wrong everyone else is, but the literature in this field is so unreliable that a record of sources is especially necessary, and I have given detailed references to the material. My debts are so many that for most one general acknowledgment of inability to pay must suffice; to officers of libraries, state archives, government departments, and banks in all states I offer thanks for courtesy and ungrudging help. Some obligations must be specially mentioned. Mr A. R. Wiltshire of the Bank of Australasia obtained for my use, at the bank's expense, some 1,400 feet of microfilm covering the invaluable records of the London office. Direct access to the records of the Bank of New South Wales was not permitted but Mr R. F. Holder was empowered to supply extracts which he selected with discretion and understanding of my needs. (It is proper to note that no bank of all those who made records available has sought in any way to control my use of the material.) The Research Committee of the University of Sydney assisted the final stages of the work, while the interest of the Commonwealth Bank made publication possible. For permission to use revised versions of material appearing in articles I have to thank the editors of Historical Studies—Australia and New Zealand (two articles) and the Journal of the Royal Australian Historical Society. My publishers join me in gratitude to Miss Joyce Fisher for the skill and care she has devoted to preparing the manuscript and the index. S. J. BUTLIN THE writing of this book was completed twenty years ago. Since then little has been published on its central subject, other than my own account of British banking in Australia and New Zealand (Australia and New Zealand Bank, 1961) but a very great deal has appeared in the general field of Australian history. To take account in detail of this work would require extensive re-writing and it has seemed to me better to let the book stand as a work of its time. It has been reproduced by offset photo-lithography so that the reader has an exact reproduction of the original text. London S. J. BUTLIN May 1968 Note on Terminology and Abbreviations H.R.A., Historical Records of Australia, followed by series number, volume number and page. H.R.N.S.W., Historical Records of New South Wales. V.P.N.S.W., Votes and Proceedings of the Legislative Council of New South Wales. Where this is followed by a year the reference is to a volume (the volumes are not continuously paged). A more precise date refers to minutes of proceedings of that date. Tasmania is used on occasions although it is, in official use, anachronistic before 1853. But it was used in the period unofficially, and pedantic adherence to “Van Diemen's Land” gives an unnecessary air of remoteness. Port Phillip District is used throughout not only because there is no justification for using Victoria before 1851 but also to serve as a constant reminder that the District was part of New South Wales for the period covered. The same was true under the name Moreton Bay District of what became Queensland in 1859. Treasury bill is never used in its modern sense. Meaning bill of exchange drawn on the British Treasury it occurs in quotations and occasionally is used in the narrative. Currency and Sterling between quotation marks are used in special contemporary senses explained briefly in Chapter 1 and more precisely in Chapter 3. Bank names are often shortened to avoid repetition of long titles. No confusion can arise except in the case of the Commercial Bank of Tasmania and the Commercial Banking Company of Sydney. Wherever this is likely a geographical reference is added to the short title. Commissary is not, strictly, correctly used after 1813 when the officer in charge of each colonial Commissariat became “Deputy Commissary General”. This title is abbreviated as D.-C.-G. but the old short title is occasionally used loosely. Dollar if unqualified means the Spanish dollar. The various other dollars are distinguished either by context or qualifying phrase. Bigge's Evidence. No complete printing of this is available. That printed in H.R.A., Series III, is cited as Tasmanian Evidence; while that in Series IV is called Judicial Evidence; the Bonwick MSS. copy in the Mitchell Library is described as Manuscript Evidence. Contents Preface v Preface to the Second Impression vii Note on Terminology and Abbreviations viii 1. THE STORY IN BRIEF I 2. “THIS COUNTRY HAS NO TREASURY” (1788–1803) 12 First Expedients 13 (a) Early Imports of Coin 13 (b) Phillip's Bills and Dollars 15 A “Rum” Currency 18 (a) Barter 18 (b) Promissory Notes 26 Government Finance 30 (a) Commissary's Store Receipts and Bills of Exchange 30 (b) Paymaster's Bills and Notes 33 (c) Copper Coin 36 (d) The Commissariat Store 40 3. THE WORKING OF THE SYSTEM (1803–1810) 51 Government Finance 51 (a) Foreign Exchange 51 (b) Commissariat Store 58 King's Efforts at Regulation 61 (a) Interest Rates 61 (b) Legal Tender 62 Bligh's Programme of Reform 64 (a) Barter of Spirits 64 (b) “Petty Banking” 65 The Insurrectionary Government 70 4. COLONIAL CURRENCY (1810–1817) 75 Macquarie's Ideas on Banking 76 Copper Coin and “Holey” Dollars 79 Barter 84 Petty Banking 89 Exchange Rates 97 “My Favourite Plan” 107 5. “ONE OF THE MOST VENERATED INSTITUTIONS OF THE COUNTRY” 110 The Founding of the Bank 110 “That Roll of Sheepskins, Tape and Sealing Wax Called their Charter” 113 The Bank's Operations before the Dollar System 119 Drennan's Notes 131 The Monetary System in 1822 138 6. THE DOLLAR STANDARD 143 The Question of the Standard 143 (a) First Phase: Dollars in Circulation 146 (b) Second Phase: The Dollar as Unit of Account 150 (c) Third Phase: Retreat 156 “A Fixed and Uniform Medium of Exchange” 161 New South Wales Abandons the Dollar 164 Transfer to Sterling in Tasmania 175 7.