How did everyone in Australia really survive before banks?

And secondly since 1817, virtually no depositor into a *savings bank in Australia who then stayed in Australia has ever lost his or her money. How come? In Australia, the Federal Government currently insures and thus guarantees personal deposits, up to $AU 250,000 per customer per institution, including approved credit unions.
*noting as well that until the mid-1960s savings banks and trading banks were treated as separate categories


  1. Click here for further background to Australia's settlement in recorded history (after 1788), specifically looking at Brisbane.
  2. Click here for a GDP refresher (Gross Domestic Product) with Australia being somewhat a standout, given our size and youth.
  3. Click here for the timelines of the "Big Four" — Westpac, NAB, ANZ and CBA and the names of many others that merged with them, or became insolvent. Banks do not "create" wealth, they can only facilitate it, remove it, or become insolvent, click here for more on how banks become insolvent.
  4. Click here for a list of 53 Australian Banks in 2020, 46 Australian owned and seven foreign owned.

Main Body

Looking at the first question, in 1788 it was the grand old days of "promissory" / "small change" exchange notes used for bartering — all having a "face" value and a "buying" value. 100 businesses apparently got started up this way in Sydney and Hobart. Yes, the imagination boggles at what they promised soldiers, administrators and free settlers, both legally and illegally. And with a major shortage of silver coins, rum became the colony's "money", more by necessity than choice.

A brief background: With the departure of Captain Phillip at the end of his tenure as governor in 1792, the infant colony was briefly left in the care of lieutenant-governors who governed on behalf of the New South Wales Army Corps. Importantly, members of this military force had the ability to raise capital — labour and materials — by borrowing against their regimental pay, which was accumulating back home in England.

At the time, John Palmer was the official commissary in Sydney, empowered to draw bills of exchange on the British Treasury countersigned by the governor. He kept the public accounts and funds of the colony and was at once official supplier, contractor and banker to the settlement.

In 1793 the American trading ship, the 'Hope', arrived with 7,500 gallons of rum in her cargo. The other goods she carried were desperately needed but the Hope's captain insisted that he would sell nothing to the colonists unless they also bought all of his rum. The New South Wales Corps officers accordingly formed a syndicate with regimental paymaster John MacArthur fixing the necessary IOUs against the regiment's funds in England, bought this cargo, then distributed it at a sizeable profit. The vast pool of rum flooded into the market place at grossly inflated prices and at once became a means of exchange. For their efforts, the New South Wales Corps were immediately dubbed the 'Rum Corps', a name which stuck until their recall to England in 1810. The rich pickings they made from that first deal gave them the power to monopolise almost all trade, particularly that in rum (the name given to all spirits), for those 17 years.
In 1805 MacArthur, having resigned his commission, was appointed 5,000 acres at Camden Park by the Privy Council in London for his growing herds of Merino sheep, and run from Elizabeth Farm near Parramatta, his original acreage that he had named after his wife.

Click here for further background to John MacArthur, his trips to England, and an account of the coup against Governor Bligh in 1808 which led to MacArthur's son going to London accompanied by the first bale of exported wool.

Click here for an archived history of Australia Post, with Isaac Nichols appointed the first postmaster in 1809. Having one man in charge alleviated the mayhem that at times occurred when supply ships arrived, which was said to include unscrupulous people taking other people's mail and selling it back to them. Nichols worked from his house, also substantial buildings he had built in lower George St then known as High Street from where he had also established a shipyard. The cost to a recipient for the service he provided was one shilling i.e. about $65 today.

Incidentally, this principle of "having the recipient pay" is still practised by Australia Post with letters or parcels where there is no (or under) paid postage. If there is no return address listed on the back, their "stated" policy is to leave a card for the addressee advising of a postal article awaiting with more to pay on it. Then, if still unclaimed and if there is no return address inside, after a length of time — between three and 12 months depending on the value of any goods inside — any goods are auctioned off for charity.

In 1810 Governor Macquarie arrived with a new army regiment, followed in November 1812 by a shipment of £10,000 value in Spanish dollars for the colony's use i.e. $40,000 of Spanish silver coins each one valued at 5 shillings. The centre part of each coin was punched out to render the coins a lower value outside Australia, with the centre part called a "dump" and worth 1s 3d.

In 1817 came the Bank of NSW with passbooks, a signature book, and a leather bound ledger book, working with these "holey dollars". MacArthur returned that same year, with his exported wool soon making him the "richest man" in NSW.

In 1822 the holey dollars and dumps were recalled and replaced with sterling coinage, using silver and copper coins issued to the troops from the London mint. In January 1826 English currency became Australia's official currency. Within 10 years all other coins disappeared from circulation. The holey dollar was demonetised in 1829 with the coins subsequently melted down into silver bullion.

After Federation in 1901, British coins continued in use. In 1910 came the first Australian silver coins, all also minted overseas, threepences, sixpences, shillings and florins, then in 1911 Australian copper pennies.
Not until after WW1 started did Australia's first silver coin minting begin, at the Melbourne mint, in 1916. The Canberra Mint was opened in 1965, in preparation for Australia's decimal coinage.

Back to 1835, with the Bank of Australasia (today ANZ) opening in London, offering emigrants a passbook they could take to Australia with them, and a separate signature card filled out and posted to their appropriate bank branch, awaiting their arrival:

Australian banks were now divided into two distinct categories — savings banks and trading banks. Savings banks paid virtually no interest to their depositors, their lending activities were restricted to providing mortgages, and ended up guaranteed or owned by the colonial governments, using post offices as front counter agencies. Safer for borrowers and depositors. Trading banks on the other hand were private banks, essentially merchant banks, which provided no services to the general public, but were underwriters for farmers, miners, builders, etc. They printed private banknotes / future-dated promissory notes, based on their paid-up capital — starting with that Bank of NSW in 1817. But most of these trading institutions closed their doors — specifically through depressions in the 1840s and in the 1890s — as businesses that partnered with them failed, with inadequate insurance. And then there were the standover merchants, not to mention bushrangers. It was a tough land. Ouch.

But with savings banks, even when fraud occurred, losses were borne via colonial government regulation only by shareholders & overseas depositors / banknote holders. Rarely, if ever, by Australian depositors / banknote holders. While runs on savings banks certainly occurred, it meant a corresponding "domino" effect was short-lived. For example, in one of the first runs in 1843 on the Savings Bank of NSW (no relation to the Bank of NSW), the colonial government undertook to guarantee trustees' borrowings, if taken out to meet the bank's repayments, of up to £50 000.
This action followed the crash, and loss to many wealthy ones, of an early merchant bank known as the Bank of Australia.

And private banknotes and cheques gained a bad "rap". Click here for further background.

Of course, the gold rush in 1851 helped — some people . A Sydney mint opened in 1855, issuing gold coins, followed by the Melbourne mint in 1872, then Perth in 1899.

In 1862, for a maximum of £20, the NSW Post Office money order service commenced, first under its Treasury, in 1865 its Postmaster-General (PMG). Money orders could be sent to the colonies, and London.

In 1893, the year of the great Brisbane flood and with many banks failing, the Queensland Treasury issued their own legal tender banknotes, and prohibited all private banks in its colony from issuing their own notes. These, instead, replaced the private banknotes of the eight trading banks whose doors had not closed.
Click here to read about the political situation, with missionaries from London requesting Queensland's protection to New Guinea in the immediate north.

But, back to banking, they were the first colonial government to issue notes on a major scale since, perhaps, the days of that regimental paymaster John MacArthur in 1793 with those IOUs. And, as intended, it helped restore confidence and brought people and investment — to Brisbane (and Queensland).

Queensland had another "first" 84 years later when under Joh Bjelke-Petersen it abolished death duties, which, yes, got the other state governments somewhat cranky as they do all have to compete for capital, and there was a sizeable inrush of capital into Queensland when that announcement came in January 1977.

Old Age Pensions and Income Tax

  1. In 1895 in Victoria and NSW, an Income Tax Act enabled them to offer the Old Age Pension in January 1901. The pension was 10 shillings weekly, or 15 shillings for married couples. It was available to all persons of reputable character (including indigenous), aged at least 65, earning less than £50 annually, and resident for 25+ years (20 in Victoria). It followed similar schemes in Denmark in 1892, and New Zealand in 1899.
  2. In preparation to offer the same starting in July 1908, in January 1902 the Qld government introduced its Income Tax Act, click here for more details. The levy was 10 shillings per annum on every adult male over the age of 21 earning less then £100, £1 per annum if earning between £100 and £150, then 5% on "produce of property" income and 2½% on "personal exertion" income for income over £150. Note, adult females weren't taxed unless their income exceeded £150. Click here for links to the other states.
  3. Then starting July 1909, the Commonwealth administered the old age pension for all Australians resident 25+ years, though it excluded Aliens, Asiatics born outside Australia, Africans, Aboriginals, Islanders, the "White" Australia policy that had to wait till 1942 before it started being wound back. It was funded yearly through a reduction of excise duties and customs duties paid to the states. For further background on Australia's tax history, click here.

Back to Banknotes in 1910 the Commonwealth Treasury said it would give the same banknote guarantee, Australia-wide, and told the Queensland Treasury to stoppit . They purchased all unused private banknote paper, once again, provided that doors were still open, overprinted them with the words "Australian Note", securing them with gold, and making them payable in gold coin at the new Melbourne Treasury, on demand. Telegraphic Transfers between banks, and London, steadily grew in importance.

In December 1911 the Commonwealth Bank, fully owned by the Federal Government, opened for general business.

In 1913, the Australian Treasury began printing brand new banknotes in Melbourne using the company Note Printing Australia.

World War 1 disrupted the operations of the Gold Standard because of the physical difficulties of shipping gold, not to mention the problems involved in financing the war effort. In July 1915, Australia followed the United Kingdom in leaving the Gold Standard. Gold exports except with the Treasurer's consent were prohibited until Australia returned to the Gold Standard, along with the UK, in 1925.

In 1920 the Commonwealth Bank became Australia's Central Bank, and took over responsibility for note printing from the Commonwealth Treasury. It became the Clearing House between the Big Four Banks (1. Bank of NSW -today Westpac-, 2. National Bank, 3. ANZ and 4. Itself) and when required, it was a Lender of Last Resort.

In 1929, the Commonwealth Bank Act provided for the requisitioning of all Australian gold in exchange for Australian notes. Formal action was never insisted upon under this legislation, but it marked the beginning of the end of the holding of gold by banks and the public in Australia. The Bank made gold available to meet domestic industrial demand, but exports were strictly controlled. The Australian pound was devalued against the English pound at different rates from 1929 until December 1931, when the government pegged it at 80% of the English pound.

In June 1932, the Commonwealth Bank Act was amended to allow part of the note reserve to be held in UK pounds sterling, with £UK 10 million of gold shipped overseas from the gold reserve of the Australian Notes Fund.

The outbreak of World War II again called for special Commonwealth gold controls. In 1939 regulations under the Defence Act provided for the acquisition by the Commonwealth Bank of newly won and other gold. After the war these controls were continued in the Banking Act, until they were lifted in 1976.

In 1960, the Reserve Bank of Australia became Australia's Central Bank in the place of the Commonwealth Bank, with each member bank holding Exchange Settlement Accounts. Smaller banks and building societies and credit unions though still had no direct access and could only provide customers with agency cheques via an arrangement with a major bank.

On February 14th 1966, Australia switched over to a decimal currency where 10 shillings became $1.00 and £1 became $2.00.

In 1967 when England devalued the pound sterling in relation to the US dollar, the Australian dollar retained its prior value ($AU1.00 = $US1.12).
On August 15 1971 when the US abandoned its $35 per ounce fixed price gold standard and allowed it to officially drop in value, by government policy (and Reserve Bank trading) the Australian dollar rose in value against the US dollar. In September 1974 it became pegged to a "trade weighted index" or a fixed "basket" of currencies.

In 1983 the Australian government fully "floated" the Australian dollar, allowing it to also officially drop in value. Today it no longer fixes its value by reference to any specific currency, or basket of currencies. In 1985 there was massive deregulation. That year sixteen foreign banks gained access to the system, followed by many more. In early 1997, the Reserve Bank increased its holding of overseas currencies, selling 167 tonnes of gold and exchanging it for $US, and later on € euro, and others.
It has enabled it to intervene, e.g. during the global financial crisis, to restore market liquidity and limit excessive price volatility.

The last bank failure in which Australian depositors lost money (and then only a minimal amount) was that of a trading bank, the Primary Producers Bank of Australia, back in 1931. Since then until today, banks have wound up but, banking sector problems have been resolved, without losses to depositors. As mentioned earlier, the Federal Government currently insures and thus guarantees deposits (up to $250,000) per customer, per institution, click here.

Yes, we are such a young country, hard to understand other countries' situations, and so hard for other countries to understand us. And isn't it amazing at how the Lord has undertaken, so often, during those past 235 years.

Click here for further background of how deposit slips and promissory notes evolved into privately backed banknotes and government backed "legal tender" banknotes, and how the bill of exchange turned into a modern cheque.

Click here for some photos of Australia's early pre-decimal banknotes and coins.

With regard to the following timeline tracking Australia's wages click here to view it as a separate page AU Wages Timeline 1788-2023

AU Wages Timeline 1788-2023 compared with US Debt

Australia Basic Wage
Fair Work Commission   Wikipedia
State Library Victoria

Fair Work Australia Youth U16 36.8%   16yrs 47.3%   17yrs 57.8%   18yrs 68.3%   19yrs 82.5%   20yrs 97.7% Adult

US Govt Debt
US Treasury
1788 One shilling and sixpence per day$70 million
1797 During Napoleonic wars UK suspends gold payments until 1821
1835$33 thousand its lowest ever
1865 Farm Labourer two shillings and sixpence per day
Carpenter 10 shillings per day
$2 billion
US suspends gold payments following American Civil War. 1862-1879
1907 Seven shillings per day or £2.2.0 per week
Basic Award to support a "man, his wife, and three children"
$2 billion
1914 During WW1 both UK and Australia suspend gold payments until 1925
1922 £4.10.0 per week with widespread price rises following the First World War
Paper money (i.e. a promise backed by 80 tonnes in gold reserves) had become all the rage following the Australian Notes Act of 1910 enabling banknotes issued via Australian Govt Treasury and cancelling those more fallible banknotes of individual banks
$25 billion, through the enormous expenditure of First World War and the setting up of the League of Nations
1928 £4.9.6 per week$18 billion
1930 £3.1.1 per week during the Great Depression
The 6 day week became a 5½ day (44 hour) week
Australia & UK suspend gold payments
In 1935 the Printers Union wins one week of paid leave
Drops to $16 billion in 1930
then rapidly increases under Roosevelt's "New Deal"
1938 £4.1.0 per week$40 billion
Fair Labour Standards Act under President Roosevelt establishes a basic wage of 25 cents per hour i.e. $US10 for a 40 hour week. Equivalent to £2.10.0 in Australia, with the US dollar worth 5 shillings. In 1940 and WW2 it rose to 6s.2d.
1946 £5.0.0 per week
In 1945 the Annual Holidays Act provides two weeks of paid leave
$250 billion due to WW2, followed by the US setting up United Nations and providing help to West Germany, Japan, South Korea, other economies worldwide
1947 £7.2.0 per week
In 1948 the 5 day week introduced
1950 £8.2.0 per weekWith the 1949 devaluation of UK and AU currencies, the US dollar in Australia now had become 8s.11d.
1953 £11.16.0 per week with considerable inflation following the Second World War
Between 1951-1955 Qld, NSW and Victoria passed legislation granting 13 weeks long service leave to all employees with 15 years or more service, a benefit unique to Australia
1960 £13.16.0 per week$300 billion
1961 £14.8.0 per week
In 1963 Commonwealth Industrial Court adopts three weeks paid leave
1966 $32.80 (£16.8.0) per week
In 1966, the AU dollar was launched, worth 10 shillings
1967 $40 (£20) per week ($1.00 per hour) 
1969 $54 per week
In October 1968 the minimum hourly wage was $1.35
$350 billion

In 1971, President Nixon cancelled the fixed US dollar to gold exchange rate for central banks since 1934 at US$35 per ounce

Click here for our experience in Australia with Gough Whitlam's "seat of the pants" government Dec 1972 - Nov 1975. Free Universities, Free Medical, wow.

Australia Basic WageUS Govt Debt
1972 $80 per week
In 1974 four weeks paid leave plus 17½% loading
$450 billion
1976 $102 per week
Wages have tripled over 10 years through "stagflation"
$620 billion
1978 $120.80 per week $770 billion
1980 $134.80 per week
In 1983 the 38 hour week introduced
$1 trillion
1987 $178.24 per week  
1990 $214.49 per week$3 trillion
1995 $284.45 per week  
1997 $359.40 per week In 1999 UK issued their first nation-wide basic wage at £3.60 per hour £144 for a 40 hour week (ca $360 in Australia)
2000 $400.40 per week$6 trillion
2010 $569.90 per week$13 trillion
2020 $753.80 per week$27 trillion
2023-2024 $882.80 per week plus 11% compulsory superannuation according to ABC nearly the highest in the world$32 going on $34 trillion. In January 2023, Treasury technically "bumped up" against $31.4 trillion, the previous limit. In February 2024 it was estimated at $34.27 trillion.

Federal minimum wage rose from 25 cents per hour in 1938 to $7.25 per hour in 2009, but has not been raised since. That's $US290 per week (and in Australia equivalent to $AU445.00 in 2024). Note too that many states have legislated much higher minimum wages.

Just before midnight on Friday 22 March 2024 in Republican dominated US Congress, an approved increase provided funding for key federal agencies including Homeland Security, Justice, State and Treasury until about September. It largely tracks with an agreement in May 2023 which suspended the debt ceiling into January 2025 so the US government could continue paying its bills.

Back to Australia. In June 2023 $882.80 per week, which becomes $176.56 per day, which is 250 times the seven shillings daily wage of 1907.

A fair increase in inflation over these 116 years. At that 250 fold rate of increase, and accelerating another 53.53 times as this was the acceleration factor over the 4.67 increase that occurred between 1780 and 1907, by 2139 we could all be earning over $1 million per day.

Not bad. Prior wages in UK: in 1640 (10d daily), in 1583 (8½d), in 1541 (6½d), in 1401 (4d), in 1351 (3d), in 1261 (2d), earlier for perhaps 1,200 years (1d).

Yes, at these times, may we keep our eye on the Lord. Let our eye be single, having "dove's eyes".

** End of article

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