The Present State and Prospects of the Port Phillip District of New South Wales/Chapter 7

by Charles Griffith

CHAPTER VII.

MONETARY CONFUSION— ITS CAUSES—EXTRACTS FROM REPORTS OF COMMITTEES OF LEGISLATIVE COUNCIL—REMARKS.

"This world is the best that we live in
To lend, or to spend, or to give in;
But to beg, or to borrow, or get a man's own,
'Tis the very wont world that ever wu known."⁠

Quoted by Washington Irving as
"Inn Window Poetry."⁠

I have alluded more than once to the depressed state of the colony with regard to money matters, or, as it has been called in the council, the state of monetary confusion. I have casually remarked, too, on the depreciation of all kind of property. The value of stock at Port Phillip may be taken to be about one-fifth of what it was four years ago—I mean stock sold fairly, and without precipitation; for when there have been forced sales, property has been actually given away. Under the latter circumstances sheep have been sold at Sydney at less than one shilling each; cattle for ten shillings; horses for fourteen shillings; and land at Maitland, on the Hunter river, at one shilling and three pence per acre. A Mr. Bourne, in his evidence before the committee on the insolvent law, mentions a case where between 2,000 and 3,000 sheep, 150 head of cattle, a splendid station, with drays, farming implements, &c. &c. were sold for £250. The wool on the backs of the sheep be estimated at £400. This is by no means a solitary instance. These tremendous sacrifices at forced sales are not only to be attributed to the want of ready money, but also in a measure to the defective working of the insolvent law, which has encouraged an immensity of fraud, and under the operation of which there is in general so little to be recovered from an insolvent estate, that it is not worth the creditor's while to look after it, and see that it is not sacrificed. Sixpence in the pound is about the average which has been realized on estates which have gone through the Insolvent Court at Sydney. I do not know the proportion at Melbourne.

In order to give a succinct view of the causes of this depression, I do not think that I can do better than make an extract from the report of the committee of the Legislative Council on immigration, which briefly recapitulates them. After going into the present state of the labour-market, and stating their conviction of the absolute necessity of restoring emigration from Europe, the report goes on thus:—

"The proceeds arising from the sale of waste lands of the colony have been hitherto appropriated for this purpose. During the last six years no less a sum than £1,000,000 sterling has been expended in the introduction of emigrants from the United Kingdom. The expenditure of so large an amount, and its sudden abstraction from the colony, has been productive of consequences which your committee cannot but regard as disastrous, and as originating to a considerable extent the embarrassments under which the community are now suffering.

"The advantages which the colony had previously enjoyed from the supply of cheap labour, under the transportation system, had, conjointly with the advanced price of wool, created a high degree of prosperity. A spirit of enterprise extended itself through the colony, and its waste lands were eagerly purchased at the government sales. The result of this speculative disposition was, that enormous accumulations of money in the government treasury were effected. The sums thus realized to the public credit were subsequently deposited in the several colonial banks,^[1] and an interest on these deposits was exacted by the government successively at rates of four, five, and seven per cent. The banks were under the necessity of extending their discounting transactions in a corresponding degree, thus keeping alive an inordinate and unjustifiable spirit of speculation throughout the community. The sudden expenditure of the whole accumulation which had been made from the land sales in immigration, and the immediate curtailment of discounts by the banks upon the withdrawal of the government deposits, have produced a degree of exhaustion which has more than equalled the previous excitement.

"Simultaneously with the occurrences above enumerated, and tending to aggravate their unfortunate influence, was the measure of her majesty's government for raising the upset price of land from five shillings to twelve shillings, and subsequently from twelve shillings to twenty shillings an acre. The adoption of this scale of augmented upset prices has been a complete annihilation of the land fund; neither the profits of sheep farming nor agriculture can ever justify the investment of capital in land at these prices; nor do your committee believe that any capitalists will ever be induced to emigrate from the mother country whilst such a system regulating land sales is in force."

Although the suddenness of the withdrawal of large sums from circulation did, no doubt, cause a great shock to public credit, yet was it the extent to which speculation had been previously carried, particularly in the purchase of land, which was in my mind the real original evil. I can therefore by no means acquiesce in the proposition so broadly put forward by the committee on the sale of crown lands, and adopted by that on immigration, which I shall give in the no measured terms adopted by the former:—

"But the greatest, the most fatal error connected with the sale of the waste lands of this colony was committed in the appropriation of the revenue derived from thence to the purposes of immigration. A million sterling has in some shape or other been appropriated to this purpose. It was forgotten that capital and labour, as elements of colonization, should exist in a new country in proportion to each other; and it was a fatal mistake to send the one out to bring the other in. The circulating medium, which, like the blood in the animal system, diffused life and activity through every part, has been withdrawn from use and the colony is now in a state of inanition. What renders the matter worse, is the fact that a large portion of the sum paid for land, and thus applied to the purposes of immigration was borrowed."

I admit the general principle that capital and labour should exist in proportion to each other; but they should also exist in proportion to land. But when was the equilibrium first disturbed? Was it not when land to the amount of a million was purchased from the government? And that disturbance would have continued, if government had held the money in its own hands, or even applied it to general purposes, the only difference being, that in such a case there would have been land without either capital or labour. To use their own illustration, if the blood all goes to the head' a man dies just as much as if he was bled to death—the only difference being between apoplexy and inanition. If indeed government had in the first instance retained the money in its hands, and then lent it back to the purchasers of land under the system of Pfandebriefe, this might have acted like cataplasms to the natural body, and the circulating medium have been thus re-distributed through the body politic—in short, things would have been much where they started. But unfortunately there is no movement in civil or political life equivalent to that which follows the drill-sergeant's command of "as you were." But I do not think it is necessary to enter into these abstract considerations in order to account for a great deal of the difficulty which has arisen, the fact contained in the last part of this extract being sufficient to explain a great part of it—"What renders matters the worse, a large portion of the money paid for the land was borrowed." If it had been added that far the greater part of the land was bought on speculation, in order to sell again at an enormous advance to expected immigrants—that a small number of men, having a large command of capital, attempted a monopoly with this object, and that this speculation failed—that while the land yielded no return, the interest on the borrowed. capital had to be paid—sufficient cause of ruin might have been discovered without looking for its origin in the subsequent disbursement of the purchase-money, "this greatest, this most fatal error," as it is called. That land was purchased at Port Phillip with the object I have mentioned, I know to be a fact; and as to great part of the £400,000 worth of land bought there, I can speak with confidence. Men attempted to play the same game with regard to land which (if they be not belied) has been more than once tried by merchants at Sydney with respect to tea and sugar, namely, to purchase the whole supply in the market) and then to retail it out at immense profit to the consumer. At Melbourne at the time their conduct was considered oppressive, as taking an unfair advantage of their command of capital, and they were commonly called there land sharks. One Sydney house alone purchased £44,000 worth of land at Port Phillip in one year—they are now insolvent. Another very wealthy firm at Sydney were also purchasers to a very large amount, but what I do not exactly know. In my mind the real subject of complaint against the government is this, that by putting up comparatively small quantities of land at a time, and by holding the sales at distant intervals, they did, under the specious terms of limiting the supply to the demand, (I do not say knowingly, but in effect) play into the hands of the monopolists. Many of the newly-arrived settlers at that time were forced to buy land at any price. Several had wooden houses, and all of them had hundreds of useless things. Store rent and house rent were dreadfully high, and the expense of living in Melbourne ruinous. To persons so circumstanced land became, in a financial point of view, as much an article of prime necessity as air or water in a natural one; and it is this class of men, driven to the wall between the land-jobber and the government, who excite my sympathy; and if the latter had had a monopoly of water, they might with as much mercy have sold it by auction by twenty butts at a time, under the specious pretence of limiting the supply to the demand, allowing the monopolist to purchase at the high price which his command of capital empowered him to offer, leaving it to him to retail it in gallons-full to the consumer at a ruinous advance.

I recollect the dismay with which the announcement of a land sale at the end of 1840 was received by some of the minor fry of speculators at Melbourne. This was put off by the governor, and the mischief was staved off for a time. But when Lord John Russell's measure was announced, making all surveyed land open to selection at £1 per acre, the bubble burst, and the ruin of the men who had speculated in land with borrowed capital was from that day certain, no matter what became of the purchase-money, and whether it were expended in immigration or otherwise; just in the same way that a merchant who had speculated to the same extent, and under similar circumstances, to obtain a monopoly of sugar, would be ruined by an arrival in the market of an unlimited supply. I do not say that all men who speculated in land did so with the object of creating a monopoly: many were, no doubt, deceived by the fictitious price which land attained through the arts of others. Nor do I by any means, in what I have said above, wish to insinuate that Sir George Gipps was aware of the oppressive tendency of this system. All I regret is, his having allowed his talents as a financier to get the better of his judgment as a statesman, and by the encouragement given to the monopolists having forced the bonâ fide settler to pay an exorbitant price for his land. But though I have thought it right to combat the opinion so broadly put forward in the report which I have quoted, yet I by no means deny that this sudden withdrawal of capital did accelerate the crisis, which had in any case been rendered necessary by the causes detailed before—namely, the abstraction of government expenditure, the rise in wages consequent on the withdrawal of the convicts, the great fall in the price of wool, and excessive speculation encouraged, no doubt, by the facility with which individuals obtained accommodation from the banks.

To return to the committee on immigration. After going into the subject which I have alluded to, they proceed to recommend the council to apply to the home government for a grant of £500,000 for the purpose of carrying on immigration, as a means of relieving the United Kingdom of its redundant population, and as a kind of bonus to the colony for having already expended a million on this object. In default of this being successful, to apply for a loan of a million, chargeable on the land fund, and guaranteed by the home government. A reduction in the upset price of land they however consider as an essential preliminary to any sales being effected. They further recommend that a remission should be made to emigrants in the purchase of lands on their arrival in the colony, equivalent to the amount they may have paid for their own conveyance to the colony, or for that of their families and servants, and this without the emigrant's being forced to place any money in the hands of the commissioners at home. The present mode of lodging money in the commissioners' hands in England being, as they remark, "one to which emigrants may naturally feel some repugnance, as it is only reasonable to suppose that almost every person will he desirous to retain the disposal of his capital in his own hands until he can become personally conversant with the character of the country to which he is about to emigrate." The scale of remission which they recommend is as follows:—£80 for a cabin passenger, £40 for an intermediate, and £25 for a steerage passenger—the designation of these sums being, however, considered as having relation to a reduced price of land.

"The only value," say they, "that can be given to waste land must be communicated to it by population, must be subject to its settlement, and contingent on the improvement effected upon it. The high upset price affixed by her majesty's government is an anticipated value, that in a great majority of cases will not be realized for centuries to come. The crown lands of the colony must consequently remain unsold, unless a different system be adopted from that now in force."

With respect to the state of the labour-market, the report contains the following observations:—^[2]

"Whilst your committee are unanimously of opinion that the present supply of agricultural labour in the colony is inadequate to its wants, and that it is indispensible to its future prosperity that a periodical supply of emigrants from the mother country should be introduced into it, they nevertheless, in arriying at this conclusion, deem it necessary to specify the description and number of immigrants that it may hereafter be deemed necessary to introduce within a given period, inasmuch as they feel persuaded that a large, if not the entire, amount of the difficulty now experienced by a portion of the labouring population in Sydney, arising from want of employment in their respective handicraft trades, is referable to the fact that this class of persons ought never to have been introduced into the colony at all, or at all events only in much smaller proportion than that in which they were actually brought to it. The evil thus created to the colony is great. Its resources have to a large extent been expended in the introduction of a class of persons unsuited to its wants—unproductive, so far as regards its great staple commodity, and who, from the want of work, and the consequent cry of distress amongst them, discredit the statement that the species of labour really applicable to, and indispensible for, the country is needed. Many of the artisans brought to the colony by the land fund are now quitting it, and several are proceeding to South America, and, by the expression of their disappointed feelings, (although several are carrying with them considerable sums of money, the accumulation of past earnings in the colony,) conveyed to their friends and connections in the mother country, are likely to create erroneous and unfounded impressions as to the real capabilities of the colony as an eligible field for immigration.

"Neither has the selection that has hitherto been made of even pastoral and farm labourers in the United Kingdom been unexceptionable in its character. Labourers burdened with numerous and young families have formed no inconsiderable proportion of those who have been sent to the colony at the charge of the land fund. However desirable it may be to have (and in many respects it is undoubtedly so) the basis of a future population thus presented to us, its advantages are counterbalanced by corresponding difficulties. The younger members of such families are incapable of aiding in the production of means for their own subsistence, and, when very numerous, form a heavy burthen to the employer. A shepherd, with a wife, and five or six young children, requires an amount of rations for their support fully equal to the services he can render, or at all events only justifying the employer in giving a rate of money wages so small as to create dissatisfaction on the part of the labourer, who is but too generally indisposed to make the requisite allowance for the peculiar circumstances in which he is placed.

"With the qualification above mentioned, your committee have no hesitation in expressing their belief that four thousand shepherds and farm labourers would readily find employment at rates of wages from £10 to £12 per annum, with lodging, fuel, and rations.

"No field, your committee apprehend, can be selected for emigration that holds out a fairer prospect to the emigrant himself than New South Wales, providing the selection be made of such as are suited to its wants. The salubrity of the climate—the excess of physical comforts of life—the constant employment presented in rural or grazing occupation—the moderate rate of wages that may be ensured—constitute advantages to the labouring emigrant which it appears questionable whether he can command elsewhere."

The gentlemen who composed the committee, from whose able report I have quoted so largely, were the colonial secretary, the auditor-general, Mr. Icely, Dr. Lang, Mr. Murray, Mr. Wentworth, Mr. Walker, Mr. Macarthur, Dr. Nicholson, and Mr. Bowman, men of great consideration and high standing in the colony—many of them large landed proprietors, and who, if they were capable of listening to the dictates of a selfish and unenlightened policy, might think perhaps that they served their own interest by assisting to keep up the present high upset price of crown land. In their recommendations on this subject I may add that they are not only borne out by the report of the committee of crown lands, and by the expressed opinion of every witness examined on the subject, but that their views are in accordance with those of every man in the colony, whether squatter or landowner, capable of forming an opinion.^[3]

The committee express their opinion that 4,000 shepherds and farm labourers would find employment. I had myself on independent grounds arrived at a conclusion which tallies with this, and which gives 1,200 as the number which would readily find employment at £10 or £12 per annum in the Port Phillip district, supposing no change to be made in the present system of land sales or the squatting tenure.^[4] But if there were a confidence on the part of the colonists that a stream of immigration would be kept up sufficient to retain wages at this moderate rate, agriculture, vine-growing, and other pursuits of this kind, would no doubt be largely engaged in, and employment provided for a still larger number. If, in addition to this, stockholders could be put on a better footing with respect to tenure, so as to be enabled with prudence to make improvements, and to engage in tillage with spirit, there is scarcely any limit which we can assign to the ultimate employment of labour, save that afforded by the want of a market beyond a certain amount for our surplus agricultural produce.

1. By the evidence of the Colonial treasurer, before the committee on monetary confusion, it appears that the balance in favour of government in the banks was, on an average, in 1837, £127,000. In October, 1840, the amount was £270,000. It arrived subsequently at the sum of £281,000, which was the highest amount. Between November, 1840, and November, 1841, government drew out of the banks £260,000. Government received on these deposits at first 2½ per cent, then 4 per cent, and finally 7 per cent.
2. I must apologise to the gentleman who drew up this report for transposing several of the paragraphs in such a way as to snit my arrangement of the subject.
3. Similar views are entertained by the settlers in some of the other Australian colonies. To such an extent was this carried in Western Australia, that the executive council (the nominees of the crown) passed a set of resolutions condemnatory of the system, in opposition to the wishes of Governor Hutt, and notwithstanding his protest.
4. This conclusion is thus roughly arrived at. The annual increase of sheep is about one-third of the whole, after making all deductions; and three men are required to every 2,000 sheep. In the Port Phillip district there were, in December, 1843, about 1,800,000 sheep, the increase on which would be about 600,000 for this year. These would give, employment to 900 shepherds and hut-keepers. Allowing 100 more as additional bullock-drivers, shearers, stock-keepers, &c., the whole would amount to 1,000; but as we may reckon that the sudden influx of labourers would have the effect of reducing wages to £10 or £12 per annum, 200 more would be pretty sure to find employment in agriculture. The increase of black cattle does not involve a corresponding increase in the labour required to attend them; and so I have made but a small allowance on this score.