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Crisis in the Age of Gold

During the 1850s and the years that followed, the mining of gold initiated a sustained period of prosperity and led to the minting of Australia's own gold coins. Immigration increased rapidly and the population tripled to reach three million between 1858 and 1889. The economy diversified and urbanisation continued with two-thirds of the population living in towns by the late 1880s.

In 1853, Queen Victoria consented to the establishment of a branch of the Royal Mint in Sydney, with later branches in Melbourne (1872) and in Perth (1899). The first mint began operations in part of Sydney's Rum Hospital in 1855, when Australia's first gold sovereigns and half sovereigns were minted. By the late 1870s, gold coins minted in Sydney and Melbourne were accepted as legal tender in Britain and most other colonies using British coin.

The south wing of the General ‘Rum’ Hospital, Macquarie Street, Sydney, 1854, before its conversion to the Royal Mint.

State Archives & Records Authority of New South Wales.

The gold rushes accelerated the development of banking and commercial banks' issuance of banknotes that were backed by gold. The public was often wary of these banknotes as they were susceptible to counterfeiting and did not constitute a national paper currency, and so they did not circulate widely.

In 1851 there were eight trading banks and 24 branches. By 1890, 33 new banks had been launched and the number of branches exceeded 1,500. Credit expanded rapidly, generating a speculative boom during the 1880s until a severe downturn occurred with The Depression of the 1890s.

£20 banknote issued by the Bank of New South Wales.

Reserve Bank of Australia Archives, NP-003986.

Queensland Treasury legal tender for £5.

Reserve Bank of Australia Archives, NP-003980.

Many of the banks that had developed during the gold rush years failed in 1893. Although the majority reopened, the banking crisis undermined confidence in private banknotes. The banks' failures resulted in the Queensland Government withdrawing the right to issue banknotes from banks in Queensland; they were replaced by Queensland Treasury legal tender notes.

The crisis of the early 1890s increased the need for a national or central bank, uniform banking laws and a national currency. The Federation of the country's self-governing colonies in 1901 gave the Commonwealth Government the power to legislate in regard to its currency, and the first national banknotes were issued in 1913. Until that time, the country's currency remained an uncoordinated mixture, comprising British copper, silver and gold coins, Australian gold coins, the banknotes of private banks and those of the Queensland Government.

Front of British £1 coin, 1901.

Reserve Bank of Australia Archives, MU-000640.

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