The increasing population of the Australian colonies led to important
changes in their monetary institutions. Hitherto the stock employed in
banking was supplied by the merchants, or invested by East Indian
capitalists. These local relations were not without their advantages:
they enabled the banks to extend accommodation beyond the ordinary usage
of companies subject to more extensive and complicated interests.
The announcement of the "Leviathan," as the Bank of Australasia was
called, created the usual amount of discussion. The capital was desired
by those who had occasion to borrow, and dreaded by such as were
interested in lending. It was incorporated in 1835; and commenced
operations the following year. By granting bills on London at par, the
manager first drew largely on the current coin. Treasury bills were no
longer the cheapest remittance, and the disposition to purchase them
declined. The outcry of the local banks reached the legislative council,
and it was proposed to make a treasury bill a legal tender. An act
passed for the purpose, but was never called into force by proclamation.
The resources of the English enabled them to vex and contract the sphere
of the colonial establishments; but had treasury bills become a legal
tender, they could have redeemed their own notes by their payment, and
thus recovered the coin which found its way into the coffers of the
stranger.
At Launceston, the quarrel between the Australasia and a local bank,
afforded much sport to those not deeply interested. Of the Tamar Bank,
20 per cent. only had been paid on its capital, which was exceedingly
small compared with its discounts and issues. Every morning, the agent
of the London took a wheel-barrow to the Tamar bank, attended by an
armed guard, and carried away the dollars in exchange for notes. The
superior strength of the Australasia soon brought the contest to a
crisis, and Mr. Gilles, the manager of the Tamar, shut up his books. He,
however, first gave warning, that such must be his course, unless it was
agreed to restore the dollar bags to the state before the war. To this
it was replied that, perhaps, the Tamar had exceeded the just limits of
its capital, and an offer made to discount a bill for its accommodation.
In the end, time was given. The parties concerned were more frightened
than hurt: no serious injury was intended.
In 1837, the Union Bank of Australia, with a capital of £1,000,000,
divided the field. This institution was formed in England, under the
auspices of Mr. Philip Oakden, a merchant, of Launceston. With such
spirit was the project accepted, that the amount was subscribed in one
day.
The chief objection to these banks was their tendency to create a class
of absentees, whose revenue withdrawn from the colonies would add
nothing to their welfare. To this it was replied, that the repayment was
intended to be made from profits the colonies would divide with the
London capitalist, which, except for his assistance, could not be
obtained.
The last business address of Arthur to his council, expressed his
antipathy to the London bank, and his hope that the monopoly attempted
would not be successful. He asserted that the proprietary, an absentee
body, had no interest but their own to regard, while the local banks
were colonial in every sense. These were his views of finance, and they
were characteristic of the time.