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The Pamphlet Collection of Sir Robert Stout: Volume 70



The Extent of Great Britain's Financial Interest in Australasia.

In the preceding article, in referring to New Zealand, it was shown that the difference between the years when capita was flowing most rapidly into that colony, and the last three years, when that flow had stopped, actually represented stunt thing like £45 to every average family of five persons. We do not know of any fact that will give a clearer idea of the dominating influence in Australasian affairs of British capital than this one simple fact. Before going into detail with regard to the three eastern colonies, Victoria, New South Wales, and Queensland, it will be well to get a firm grasp of the aggregate financial interest possessed by Great Britain in Australasia. In 1883 the Economist published an estimate of British investments page 11 in the colonies, and in 1887 the same journal published a revised estimate calculated up to date. We give the two side by side, showing the increase in every case:—

British Investments in the Colonies

(Represented by Securities held in Great Britain).

—1887 Increase. Astralftsia—£ 50,000,000 48,000,000 49,000,000 22,000,000 23,000,000 6,300,000 1,500,000 200,000 200,000,000 255,000,000 5,600,000 500,000 30,000,000 4,000,000 2,400,000 112,000,000 500,000 7,000,000 3,000,000 07,000,000 77,000,000 58,500,000 30,000,000 36,000,000 9,500,000 2,700,000 300,000 £ 17,000,000 Kew South Wales...... Zealand....... 2,000,000 9,500,000 8,000a0O0 13,000,000 3,200,000 1,200,000 100,000 South Australia ..?... Western Australia,..... fiji.................. Total Australasia .. 281,000,000 272,000,000 5,000,000 1,000,000 32,500,000 5,700,000 2,400,000 185,000,000 500,000 8,000,000 000,000 300,000 81,000,000 17,000,000 frpeof Good Hope...... 000,000 500,000 2,500,000 1,700,000 23,000,000 1,000,000 00,000 2,700,000 Africa ............ £620,000,000 £744,000,000 £124,000,000

We have quoted the whole of the corresponding figures for the other British possessions, as they permit a very instructive comprison, a comparison that seems to effectually dispose of the oft-repeated assertion that the British investor is slow to appreciate Australasian securities, A period of about three-and-a-half years had elapsed in 1887 from the making up of the first estimate, during which time £81,000,000 had been invested En Australian securities, and only £43,000,000 in the securities of India, Canada, the Cape, and a large number of other colonies all put together.

page 12

About five years have elapsed since the second of the foregoing estimates was made, and during the period it is certain that a further enormous increase has taken place in the British stake in Australasia, The government of New South Wales has borrowed over £10,000,000, the Victorian governments borrowed £12,000,000, and the other Australian governments £11,000,000. The various Australian governments together, have, therefore, increased their indebtedness since 1887 by t total of about £33,000,000. About £41,000,000 have really been borrowed, but £8,000,000 were used to redeem loans falling due. Municipal governments have borrowed with greater freedom than before, whilst large sums have been obtained on debentures of various kinds, and the banks and other institutions have received large sums on deposit. If we calculate the average increase per each year of the five at two-thirds of the increase shown in the 1883-87 period of three-and-a-half years, or, say, sixteen instead of twenty-three millions, we find a total increase of eighty millions of which, as already seen, we can trace thirty-three millions in government loans. Adding this increase to the 1887 total, we find that in this year (1892) the amount of British investments in Australasian colonies represented by actual securities, reaches the gigantic figure of 361 millions sterling. This does not, however, by any means represent the total of British interests in these colonies, since it takes no account of the moneys invested in private businesses and industries of various kinds, which are not and cannot be represented by securities on the London Exchange. A statement published in 1890 by a very well informed writer, put this interest at a capital value of sixty millions, Mr. Coghlan estimates the yearly payments made by the single colony of Net South Wales to outsiders at about five-and-a-quarter million (public and private combined). This sum would represent t capital of 131 millions paying an average interest of 4 percent, of which certainly the thirty-one millions is in excess of the value represented by public securities. When, therefore, m ignore these two estimates and take thirty-nine millions only as the British interest in private industries throughout Australasia we know we are on the right side beyond any possibility if doubt. Adding 861 millions and thirty-nine millions together, we get an aggregate of no less a sum than £400,000,000 as the very lowest possible estimate of the public and private indebtedness of Australasia to Great Britain. The total might page 13 Very easily, and on grounds readily defensible, be put at from £50,000,000 to £500,000,000; but we prefer to be on impregnable ground, and are content to take the still vast sum of £400,000,000 as the total. The amount is surely large enough to impress the most thoughtless reader, especially if it be remembered that it represents an average of £100 per head for pay man, woman, and child in Australasia, or, say, £500 for every average family of five persons.

It will now be interesting to trace as far as we can the movements of capital towards the three eastern colonies of Australia, The following table will throw light on the subject:—

New Capital Arrived, as shown by Excess of Imports.

Year. 15 Years—8 Five-year Periods.
Victoria. N. S. W. Queensland.
Total £ Total £ Total £
1877 to 1831 4,089,911 4,098,941 239,395*
1882 to 1880 16,258,753 22,216,282 7,797,209
1887 to 1891 45,115,940 582,457 8,509,9008*

These figures in the aggregate—for the three colonies for the whole fifteen years—show an excess of imports, which may be taken to represent arrivals of new capital, amounting to £92,000,000. This sum may be taken as giving a fairly correct approximate estimate as regards the position of the three colonies as a whole, in connection with Great Britain, but the figures need correction as between the three colonies themselves. Victoria has some considerable interests in the other two colonies, principally in station properties and shares in mines. Mr. Hayber states that it has been ascertained that in 1890 Victoria received £453,250 dividends from the Broken Hill silver mines. It is clear that moneys received by Victoria as profits or dividends pat be deducted from the above, and not confused with new imports of capital. On the other hand the colonies that part with such moneys must make a corresponding addition, since such exports must not be taken as available to pay for imports. After careful research, we have estimated the payments to Vic- page 14 toria at an average of £500,000 per year for the first five yean, at £750,000 per year for the second period, and at £ 1,500,000 per year for the third period, contributed as follows;—By New South Wales, £250,000 per year for the first and second period. £750,000 for the third; by Queensland, £250,000 per year first period, £500,000 second period, and £750,000 the third period Of course it is understood that these figures are simply estimate the bases of calculation of which are more or less obscure. We think, however, that they are fairly accurate. New Sort Wales receives moneys from Queensland pastoral and mining properties, but we have taken no notice of this fact. If, therefore, in the following amended table any colony suffers it will be New South Wales rather than Victoria or Queensland:—

* Excess Exports.

New Capital Arrived, with Corrections as stated.

Years. Victoria. New South Wales. Queensland.
Total £ Total £ Total £
1877 to 1881 1,589,911 5,348,941 1,010,605
1882 to 1886 12,518,753 23,466,232 10,297,309
1887 to 1891 37,615,249 4,332,457 Excess exports (£4,759,906)

The aggregate of these figures is again nine-two millions; but the corrected distribution reduces the Victorian total from sixty-five to fifty-two millions, increases the New South Wales total from twenty-seven to thirty-three millions, and creates a Queensland total of seven millions. It matters little how these figures are looked at; any way and every way they are remarkable. The figures in regard to Victoria are of exceptional interest; indeed, they are probably without parallel in the whole history of finance. Never before have a single million of people had thirty-seven millions sterling thrown into their midst in the brief period of five years. The "leaps and bounds" shown by the advance from one-and-a-half millions to twelve-and-a-half millions are great enough for special comment, but the advance from twelve-and-a-half millions to thirty-seven-and-a-half millions is simply bewildering. The figures for New South Wales are in another way almost equally remarkable, the rise from five millions to twenty-three millions, followed by a drop to four millions, shows a most notable fluctuation. As for Queensland, page 15 the changes have really been of a more violent nature than in either of the other two colonies.*

In the case of New Zealand, which has been dealt with at knight, it was clearly shown that the years of exuberant prosperity—the years when everything was "booming"—were the Tears when new capital was pouring freely into the colony. The same state of things is most vividly illustrated in the figures we are now dealing with. Take Victoria, it is well-known that the first five-year period was not a brilliant time. It is also well-known that during the second period there was a substantial improvement, which became more and more marked, until in the third period this improvement culminated in an outburst of prosperity such as the world seldom sees. In the case of New South Wales the first period was a generally brighter one than in Victoria, and it will probably be admitted that the time when prosperity reached its "booming" period in this colony corresponds with the five-year period 1882 to 1886. Passing along to Queensland we find, as already stated, violent fluctuations. Daring the first period Queensland was forging ahead slowly, the second period was one of very great expansion, the third period has been, as Queenslanders know to their sorrow, one of painful depression, Referring to the table, it will be seen that in every instance the period of supreme prosperity was also the period when capital was flowing most freely into the colony.

page 16

We get a still clearer view of the facts we are putting forward by finding and comparing the arrivals of new capital fat each 1000 of the population.

* After this was published the Author observed the necessity of keeping a distinction between the excess of imports in the external trade and in the intercolonial. Australasian goods are naturally of more value in the loading ftp in the shipping port, by reason of the freight, &c. Thus, 1,000 tons of Sal shipped in New South Wales for Victoria at 10s. per ton would present an export of £500, and if the freight were 5s. per ton the ship-sent would represent an import of £750, But there would not be an import of £250 capital, that sum would simply represent earnings. In the per 1890, the intercolonial imports were valued at £1,441,683 more than the exports. It is impossible to distribute this sum accurately amongst the bus colonies, but the aggregate Australasian imports of new capital may it taken as reduced from that amount in 1890. The alteration does not effect the general argument, especially as the difference was allowed for in eme of the later calculations. It in no way touches the question of the aggregate indebtedness, nor that of the yearly interest, it simply touches the pint of the proportion of the total new capital left to be imported after balancing interest charges. The intercolonial trade is almost wholly carried on in colonial-owned vessels, while the external trade is almost wholly carried on in British or foreign vessels.

Arrivals of New Capital per 1000 Population in each Five-Year Period.

Period. Victoria. New South Wales Queensland.
Total £. Total £. Total £.
1887 to 1881 1,883 7,523 4,745
1882 to 1886 13,220 25,958 34,657
1887 to 1891 34,165 3,982 12,427 *

Figures like these most not be passed by with indifference. They are fraught with the deepest interest for all who desire to understand Australian affairs. We see that in Victoria during the first period of five years the arrivals of new capital equalled £1,883 for every thousand of the population, and that in the second period the amount rose to over £13,000, and in the third period to no less than £34,000, The most vivid idea of the influence of all this new capital is, however, to be gained by calculating the amount per the average family of five persons, This comes out at £9, £66, and £170 respectively for the three periods. Was ever before financial madness carried to such a point as indicated by this last figure? In New South Wales the new capital per family was equal to £38, £130, and £20 for the three respective periods. In Queensland the new capital, per family was £24 the first period, and £173 the seconds period. A sweeping change was effected during the third period, for not only was there an entire stoppage of the supply of new capital, but a drain equal to £62 per family, for interest had to be met With the whole of these marvellous figures before us, we are better able to understand some of the sudden and remarkable ups and downs in the prosperity of these colonies during recent years, It will be noted that in all of the three colonies the second period (the years 1882 to 1886) there were large imports of capital and marked prosperity, whilst in the last periodic movement of new capital towards Victoria was continued at i wonderful acceleration of speed, and in New South Wales showed a signal reduction, and in Queensland came to a dead stop. The page 17 flow of capital into Queensland during 1882 to 1886 equalled, per head of population, the wonderful flow into Victoria during Ike next following five years. There need be no surprise at the very extreme depression existing during the last few years in Queensland when it is noticed that the difference between the receipts of the second period and the payments of the third period taken together meant fifteen millions, or £235 for every family of five persons, which is equal to £47 per year, a difference slightly higher than that shown in New Zealand between what we may call the fat and the lean years.

The growth of population in the three colonies during the respective periods dealt with was as follows:—

* Sent away.

Increase of Population.

During five years, ending— Victoria. New South Wales. Queensland.
1881 No. Per cent. No. Per cent. No. Per cent.
1881 78,169 167,229 27 35,494 19
1886 120,624 14 207,260 27½ 114,514 51
1891 157,294 15½ 175,960 17¾ 64,237 19

These figures should throw a good deal of light on the important question of how far newly arrived capital has been absorbed in actual development of the country. If we find that in a given period there have been enormous arrivals of new capital without any very marked increase in the population, it is a reasonable assumption that the money has not been used for the opening up of the country and the creation ot new industries, but has rather been used in mere speculation. On the other hand, if we find that, concurrently with the absorption of large sums of money, there has been a very marked increase of population, we may conclude that the probability is that there has been a considerable expansion of the industries of the gantry. Looking at the figures from this point of view, it will be at once seen that Victoria occupies by far the worst position. She has, especially during the past five years, imported new capital to an extent without precedent in the history of Australia, and, as far as we know, without precedent in the history of the world, and yet the increase in population shows a very light percentage. This means that whilst the burdens have grown, both in bulk and in proportion, more rapidly in Victoria than in page 18 either of the other two colonies, the number of burden-bearers has increased at a much slower rate. It is worthy of note that, in the first period, the rate of increase in this colony was neatly three times that in Victoria; in the second, nearly twice as great; and, in the third, about one-seventh greater. That during 1886 to 1891 New South Wales should increase her population faster than Victoria, while absorbing only one-ninth as much new capital, shows that actual development, real production, was on a far more satisfactory scale than in Victoria. Yet, the figures show plainly New South Wales has felt, has suffered from the failing off in the extent of British investments which marked the two previous periods. The silent eloquence of the Queensland figures can scarcely be improved upon by comment. An enormous supply of money, a phenomenal increase of population in the 1882-86 period, followed by collapse during the years 1887-91, tell their own tale. It will be needful to take into consideration the subject of the relation that exists between production in the various colonies and their respective burdens of indebtedness. This will he dealt with in a future article. This one may well conclude with a reference to the sudden restriction in the flow of new capital which marked the year 1880.

A Remarkable Year.

The figures for that year are remarkable. For some years before there had been a considerable, in some cases a very heavy, flow of capital to these colonies, but in 1880 this flow absolutely stopped, and these colonies were called upon for remittances. This change was of so marked and decisive a character as necessarily to arrest attention. The cause of the change was the memorable financial crisis in Great Britain, which is chiefly known in connection with the failure of the City of Glasgow Bank. It is impossible to bring home to Australians in a more vivid manner the consequences to Australia of financial disaster in the British money market than by a presentation of the fads relating to 1880. Indeed, on referring to the returns for Canada and the Cape, a precisely similar state of things is found to ha, occurred. In 1879 the aggregate importations of new capital into the three colonies of New Zealand, Victoria and New South Wales, as shown by the excess of imports, exceeded six millions sterling, whilst in 1880 over three millions were actually sail away, making together a difference of about nine-and-a-half millions against 1880, In 1881 the importations were resumid, page 19 but on a more restricted scale. We seem well within the bounds in saying that the financial crash of 1879 reduced British investmente in the three eastern colonies during the two years, 1880 rod 1881, by considerably over ten millions sterling. A reference to the following figures will enable the reader to more dearly grasp the facts relating to the years named:— Excess of Imports. Excess of Exports. Victoria 1879 1880 1881 ........" £ ,580,368 466,418 £1,397,665 New South Wales 1879 1880 1881 1,112,028 1,279,207 1,575,063 New Zealand 1879 1880 1881 2,631,459 1390,179 190,681 Canada 1879 1880 1861 2,094,634 1,408,003 284,342

The returns for Queensland and for the Cape of Good Hope show the same influence, though not in the clear manner shown in regard to the colonies whose returns are quoted.