THE BOOM DECADE (1880-1890).
A Great Boom Decade.--Causes of Inflation of Values.
--Excessive Rating Valuations.--False Basis of Assessing
Capital Value.--Prodigality Succeeded by Financial
Stringency and Collapse of Boom.--Difficulty in
Determining Real Values.--Sir Hugh Nelson's Legislation.
--Sound Finance.--Stability of State.--Prospects Good
To-day.
The prospects of Queensland had seldom been brighter than they were at
the opening of the 1880-90 decade. The seasons were good, the outlook
was regarded as brilliant, and a general air of confidence reigned.
The Government were spending loan money lavishly, and large amounts
were being spent in introducing a stream of immigrants from Europe.
These and other causes contributed to the prevailing over-confidence
and the consequent excessive values put upon fixed property. One
was the influx of capital for investment on private account, for the
confidence felt in Queensland mortgage securities not only extended
to the other colonies of Australia, but also to the mother country.
Another was the discovery of subterranean water in Western Queensland,
and the opinion expressed by geologists that more than one-half the
total area of the colony, and that in the driest parts of the far
West, was artesian water-bearing country. The discovery, it was
argued, had added a new province to Queensland, and one whose
fertility, water once provided, would not be excelled, despite a
normally light rainfall, by any other part of the continent. One
consequence was the sale of Western stations at high prices, and
the investment by their late owners of the proceeds in city and town
properties. They had experienced the risks of the far inland climate,
and they wanted to invest in land in the seaport towns, which must
quickly become centres of extensive trade.
Another cause was the raising of rating values by the local
authorities, of whom those having jurisdiction in suburban or country
areas were endowed with L2 from the Treasury for every L1 raised by
rates. To augment the claims for endowment, although the rate levies
were in a few cases raised to the maximum legal limit, in most the
valuations alone were raised, and the rate levy left untouched. It was
held that it paid the property owner to contribute a high rate when
with the endowment it meant three times that sum, most of which would
be spent in improving his land by making roads and carrying on other
local works calculated to enhance property values. A further cause
of inflation was the cutting up of suburban land into 16-perch
allotments, and selling them on long terms to working men and to
speculators. A still further cause was, as already mentioned, the
influx of external money at reduced rates of interest through the
financial institutions. At first rents were so high as apparently to
justify an advance on true values; but as the expanding process went
on vendors ridiculed a capital value based on income-earning capacity.
"What is the use of talking nonsense!" the agent would exclaim; "it is
not what this property will bring in annually now, but what it will be
worth in twenty years' time."
Even conservative loan institutions accepted valuations based on
actual sales. Prices in many cases doubled and quadrupled in a few
months without much regard to the income-earning power. Then people
were told that Brisbane would by and by, with an immense railway
mileage finding its terminus at the wharves, be as big as Sydney or
Melbourne; that land in George-street and Collins-street was realising
L2,000 per foot frontage, bare; and that therefore choice sites in
Queen-street could not be worth less than L1,000 per foot frontage.
Thus prices advanced until the second half of 1888, when the demand
for real property almost ceased. From that time until 1893 values were
as far as possible upheld by the mortgagees, for they believed that
the stagnation must be but temporary. Then came the crisis in the
world's money markets, and it smote Queensland with prostrating force.
The gradual reduction of local authority endowments, followed by their
abolition in the year 1902-3, and the consequent increase of rate
burdens, had a depressing effect upon property values, so that even
to-day, more than sixteen years after the collapse of the boom, city
lands do not realise more than one-half the prices demanded and often
obtained in 1888.
It is easy to blame the leading parliamentarians of the time for their
prodigality in expenditure; but, when the most experienced bankers of
the time threw prudence to the winds under pressure of a flooded money
market, we may at this distance of time judge public men less harshly
than they were judged in 1893. Confidence was universal, and the
man who raised a warning voice found himself figuratively "sent
to coventry." An epidemic of swollen values pervaded the entire
continent. Even so late as 1893, two skilled and disinterested
Ministers of the Crown, and both possessed of banking experience, who
were commissioned by the Government to report confidentially on the
securities of the Queensland National Bank soon after its suspension,
failed to realise the full extent of the inflation of past years,
or the depreciation in land values that had taken place despite the
efforts made to maintain them. For they gave such a report of the
values of the bank's securities as induced the Legislature to sanction
an abortive scheme of reconstruction and the retention of Government
moneys. It is, however, to Sir Hugh Nelson's credit that, three years
later, he passed through Parliament an amending Act, embodying the
scheme which has since restored the bank to the status of a "national"
institution.
Nineteen years have elapsed since the close of this period of
extravagant borrowing and reckless expenditure, both public and
private. For some years past Queensland has been enjoying almost
unexampled prosperity, and the question naturally arises whether
that prosperity may not be followed by another crisis. On this point
examination of fixed property values, which are a good index, leads to
a favourable conclusion. Of city or town lands there has of late years
certainly been no inflation. Farming and dairying land values have no
doubt risen rapidly, but not more, perhaps, than in proportion to the
enhanced stable income-earning value arising from the success of the
sugar and dairying industries and the enlarged markets available since
federation to farmers all over Australia. In pastoral country there
has certainly been no such inflation as occurred in the 1880-90
decade. Buyers discounted the future when, to justify their
anticipations, the 372,105 square miles of artesian water-bearing
country should have been already opened up and the country made
increasingly productive by the streams from thousands of bores.
To-day, as shown elsewhere in this book, artesian water is flowing
to such an extent in Queensland that it would, with complete
reticulation, supply 12,000,000 people with 40 gallons a day each.
This in a country, too, which formerly was almost destitute of surface
water. More bores are every year being put down, while geological
research has lately added considerably to the area of artesian
water-bearing country in Queensland. Generally trade is sound to-day,
while banking deposits have made but gradual progression in volume
during the last twenty years. Close settlement is rapidly going on,
and the pastoral industry, which furnishes about 50 per cent. of our
exports, is in a most prosperous condition after several good seasons
capped by recently advancing prices. Wool alone, whose producers are
realising highly satisfactory profits, formed 28.55 per cent. of our
exports in 1907. Over gold mining there may be a fleeting cloud, but
every year's laboratory research extends the area of remunerative ore
deposits by reducing the cost of treatment. The cost of production and
transport in all the primary industries is being gradually lessened.
Happily there is no boom, present or prospective, to disturb the
steady progress of the country; and it is reassuring to learn from
recent public speeches by eminent Australian bankers that they are
refusing to make advances for other than legitimate development.
[Illustration: SWAN CREEK VALLEY, NEAR YANGAN, WARWICK DISTRICT]