United States. Dept. of Commerce and Labor United States. Bureau of Foreign Commerce.

Consular reports, Issues 196-199 online

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BANKING IN NEW SOUTH WALKS. 99

evidence ia the later returns of the banks. This is shown in the rapid augmentation of
♦* free" balances of costomers, 1. e.^ moneys not bearing interest. The immediate cause of this
is doabtless the existing low rates of interest allowed by the banks on deposits for fixed
periods and the consequent reluctance of customers so to deposit their money. The augmen-
tation referred to, between the September and December quarters of 1S95, amounted to
/'TUO^ooo, the fixed deposits remaining, meanwhile, virtually stationary. It may I e here
remarked that in the comparative absence of any great assortment of marketable securities,
the fixed deposits of the banks are a favorite means of investment with the people of this
colony.

Discounts and other advances. — These items aggregated ;f 38,502,387 on the 31st of De-
cember, 1895. Advances of all kinds have for some time past been steadily declining, the
total decrease during 1895 amounting to /^i, 298,629. This movement can only be due to a
contraction of business which has steadily manifested itself since the crash of 1893. Dis-
counts do not form so heavy a percentage of banking business in this country as in England,
France, and the settled countries of Europe, nor are advances against scrip so common. Ad-
vances against real estate and other kinds of property fully make up for these deficiencies.

Coin and bullion, — This amounted, on the 31st of December last, to ;^7, 5 1 6,280, equal to
23.91 per cent of the total liabilities of the banks and no less than 65 per cent of their liabil-
ities pajrable on demand. This latter percentage has, indeed, been an increasing one from
the ante-crisis period, until its maximum of 75.6 was reached in the September quarter of
1894. Thereafter a decline set in, although, even at its December, 1895, ratio of 65 per cent,
the position indicates an enormous degree of banking strength.

The present rates of interest allowed by the banks on fixed deposits are: On deposits for
six months, 1^4 V^ cent; on deposits for twelve months, 3 per cent. In certain exceptional
cases, deposits are received for a longer period than twelve months and at slightly higher rates.

The rates charged on advances are approximately as under : Discounts, three months, at
5 to 6 per cent; above three months, at 5^ to 6^ per cent; overdrafts, say 7 j^er cent.

In Sydney, there is no bank clearing house as understood in New York, London, etc.
We have a system, however, of check clearances, which assimilates somewhat to the clearing
house, and is known as the Banks' Exchange Settlement, or Bankers' Pool. This system
came into operation in January, 1894, and is based upon the principle of a gold ''pool" of
;£'700,ooo, toward which each of the thirteen banks contributes according to the magnitude
of its transactions. The gold thus pooled is never allowed to fall short of ;f 700,000, nor is
that amount exceeded ; it remains, in short, undisturbed in the vaults of the banks under the
charge of three trustees. While the gold thus remains stationary, no contributing bank is
allowed to let its daily credit balance fall below 25 per cent of its fixed share in the pool.
This system includes the clearance of country as well as metropolitan checks. The total
amount of checks exchanged last year exceeded $109,000,000. As the banks do not pass
through the "pool" such of their own checks as may be deposited with them by their own
customers, this total falls, far short of the actual clearances for the year, which has been esti-
mated to reach no less than ;f 240,000,000.

Reference has been made to the enormous amount of metallic reserves held by the banks.
This feature of colonial banking has been much discussed and, to some extent, criticised by
a section of the Sydney press. It is alleged, with reason, that these nonproductive reserves
arc very costly, and that, therefore, they militate against borrowers. A plan for centralizing
these reserves into a common pool, with the object of making them productive, has been
broached and considered, but the banks, at least, although mainly interested, have not evinced
any warm approval of the scheme. Apparently banking must needs remain costly to this and
neighboring colonies until, in the course of their inevitable development, they establish larger
local exchanges and a more pronounced centralization of their money markets. As the Aus-
tralian colonies are not contiguous to any large monetary center, such as New York, Chicago,
and even London, in their relation to cheaply banked Canada, they must perforce provide
centers of then- own, and this can only be accomplished in the slow processes of time. Mean-
while, scrip security can not be depended upon as being, at all times and under all circum-



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lOO BANKING IN NEW SOUTH WALES.

stances, immediately convertible, as in London, New York, etc., and, as an indispensable
alternative, lai^e coin reserves must l>e held by the banks. These reserves are, however,
under the exigencies of the times, unduly inflated.

The volume of exchange business between the United States and New South Wales is
not at present of such a magnitude as to form an active market in bills upon the two countries.
As a matter of fact, although some of the banks draw direct upon certain of the largest cities
of America, these transactions really centralize for settlement in London. Of course, drafts
for moderate amounts are freely obtainable for personal expenses and other small disburse-
ments, in addition to which circular notes are issued; but, in the case of large commercial
commitments, the drafls are almost invariably drawn direct upon London and marked subject
to negotiation in America. It follows tliat at times persons transferring funds to America are
subjected to a slightly heavier charge than in the case of moneys remitted direct to London,
but this, of course, de(>ends upon the course of exchange between American bank places and
London, the rate of which sometimes results in a premium on the sale of the drafts referred
to. The gold shipments hence to San Francisco, noticeable from time to time, are almost
exclusively on English account, not colonial. It sometimes happens that payments for Ameri-
can produce due from England can be more advantageously effected by the direct shipment
of gold hence, rather than from London, and, under cable advice from that center, certain of
the banks, principally the large Anglo- Australian institutions, occasionally so ship gold. Of
course, as the commerce of the United States with the Australian colonics increases, exchange
transactions will multiply, and the practice of drawing direct upon the great centers of the
Union will come more into vogue.

By far the most active exchange business of the banks is naturally with London. The
present buying and selling rates of the banks on that city are quoted as under: Buying— on
demand, par; sixty days' sight, one-fourth of I per cent discount. Selling— on demand, I !^
per cent premium; sixty days* sight, three-fourths of I per cent premium.

The rates of exchange on London are largely governed by the seasonal movements of wool
and other produce to Europe. The bills arising therefrom serve to place down in London
large sums of money at the disposal of the banks, and their selling rates at these periods
naturally tend toward ease. Against this tendency, however, is to be s^t the large semiannual
service of interest, amounting to upwards of /■2,C)00,ooo per annum on the external debt of
New South Wales. The net result of these influences and counter influences is that exchange
on London is generally in active request by the banks. The large monthly coinage of sov-
ereigns by the Sydney mint (which absorbs most of the Queensland gold as well as our own)
to a lai^e extent drifts toward London, thus tending to replenish the banks' resources at that
center.

The savings banks of the colony are the Government, or post-office, banks and the Sav-
ings Bank of New South Wales. The former receives from the public deposits at interest of
from IS. upwards to a maximum of ;£'200, beyond which no single depositor is entitled to
interest. The maximum rate of interest is at present 4 per cent per annum, but this rate is
to be reduced at and from the end of the present half year to 3 per cent. The funds of the
post-office banks, in one form or another, are under the direct control of the Government.
The balance due to all depositors at the close of 1895 was ;^4,i 21,700.

The Savings Bank of New South Wales is an institution of which Sir George R. Dibbs,
ex-Premier of this colony, is the managing trustee. It was established in 1832. The presi-
dent of the bank is his excellency the governor for the time being. The total amount of
deposits held by this bank on the 31st of December, 189$, was ;f3,95I,874. The bank
issues annually an admirably arranged statement of its affairs, from which all essential par-
ticulars of its business, down to the minutest detail, can be seen at a glance. From the latest
of these statements, the following particulars are taken: The average rate of interest realized
on mortgages during 1895 ^^^ S-7^ P^*" cent, compared with $.81 for the previous year; de-
bentures yielded 5.26 per cent; bank deposits, 4.4 per cent, as against 4.73 per cent; and
treasury bills, 4.25 per cent, the general average on investments during 1895 being 4.67 per
cent, as compared with 4.91 per cent in 1894. The rate of interest allowed on depositors'



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BANKING IN NEW SOUTH WALES. lOI

accounts closed during the year is 3^ per cent, while on deposits in the bank up to the 31st
of December the rate of interest is fixed by the trustees when the yearly accounts are made
up. In this institution, also, the amount at interest in every single account is not allowed to
exceed the sum of ;f 200. The bank has twelve branches scattered throughout the colony.

The combined deposits held by these two savings banks thus amounted, on the 31st of
December, 1895, to ;^8,o73,574, as compared with £AyTy>A^9 '^^ December, 1890. The
deposits in the banks of issue, similarly compared, show the following results: In 1890,
jf35»46o,ii8; in 189$, ^'30,085,406. The movement of balances appears, therefore, to have
been strongly toward the savings banks. It should be added that the prevailing spirit of leg-
islation points to the speedy amalgamation of both savings banks.

The present tendency of banking resources in this colony is toward accumulation, and, as
a consequence, both borrowing and lending rates are weakening. One circumstance, check-
ing this movement somewhat, is found in the case of certain of the reconstructed banks.
These institutions mostly engaged in 1893, when money was scarce and dear, to pay interest
fixed for years at 4^ per cent to their depositors. Events have shown this rate to be alto-
gether out of propordon to current terms, and in this colony at present we have two sets of
banks— one still borrowing at 4^ per cent and the other at less than 3 per cent. The result,
it is to be feared, is that borrowers do not in all cases obtain the full benefit of declining rates.
The substantial fact remains, however, that loanable capital is abundant, and these conditions
should not fail ultimately to attract it toward the fuller development of the staple industries
of the colony.

Visitors from America to this colony should take care to provide themselves with the most
convertible form of money. Drafts on London may occasion some difficulty, especially if
only the first of exchange or original be presented, the Sydney banks looking for the com-
plete set before entertaining any request for negotiation. Even then, the question of identi-
fication may give rise to trouble. Direct drafts on Sydney can readily be obtained in New
York, Philadelphia, Chicago, San Francisco, and other cities, and with these there is no
trouble. Circular notes, Bank of England notes, greenbacks, and United States coin are, of
course, readily convertible, but a direct draft appears to afford the best medium.

May 4, 1896. ROBERT OSBISTON.

As it will be observed, from the above r^sum^, that the banking methods
in Australia differ considerably from ours, a few observations, in terms com-
mon to our people, may justify the use of a little more space.

The magnitude of the banking "crisis'* in this country was noted in my
report on the "Financial crisis of 1893,*' published in Consular Reports
No. 168 (September, 1894) and was commented on freely by the press of the
country. But as gigantic as the financial institutions appear, and are, con-
sidering the population of the country, when the subject is somewhat ana-
lyzed, so as to bring it in form admitting comparison, this appearance
materially changes.

The twenty-four banks now conducting the monetary affairs of Australa-
sia have an aggregate paid-up capital approximating J83, 000,000, with liabil-
ities of over 1500,000,000, while among the available assets, which seem to
be ample, they hold 1 100,000,000 in coin.

But it must be remembered that this vast capital, while largely central-
ized in management, is well distributed over the whole seven colonies, as
each of these great banks have numerous branches scattered throughout the
country. I do not know the total number of branches of the twenty-four
financial institutions, but I see advertised, in the Australian Pastoralist's
Review, two hundred branches of the Bank of New South Wales, well dis-

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I02 BANKING IN NEW SOUTH WALES.

tributed over the colonies. The Commercial Banking Company of Sydney,
Limited, has one hundred and five branches in Sydney and at other points in
the colony of New South Wales. The Union Bank of Australia, Limited,
has ninety-four branches, some in each colony ; while the Bank of Austral-
asia has one hundred and fifty branches well distributed throughout the whole
of Australasia.

From the advertisements of these four banks, I would feel quite safe in
concluding that the twenty-four banks of Australasia must have a total of at
least two thousand four hundred branches; so there would be, as would
appear to the casual observer in our country, a total of two thousand four
hundred banks in the country.

Then, as the minimum of our three thousand seven hundred national
banks is 150,000 paid-up qapital, the average capital seems to be greater in
the United States than in Australia, at least this would be so, if the so-called
"banks" throughout this country were really banks, instead of so many of
them being branches.

The methods, too, differ greatly from ours. The head office is presided
over by a manager who is really but chairman of a committee chosen by the
directors, and this board, constantly in attendance, constitutes the real
authority. The head, or so-called general manager, has very limited dis-
cretionary authority, as nearly all questions relating to loans, investments,
etc., are submitted for the discussion and decision of the board.

The managers of the branches have very small authority or responsibil-
ity. The clientage is well known at headquarters, and for any deviation
from the common practice, instructions are asked and sent from the central
office.

Here, banking has become a profession, with a sort of civil-service system
prevailing throughout the country. Each great bank has a regular staff, the
members of which are fixtures, transferable at the will of the "board," but
rarely removed except for excellent cause. A position in a bank means a
position for life. The staff is trained by life experience. Only young men
are employed and they are advanced for good service. The oldest "man-
agers" of to-day entered the service of the same bank when mere boys. As
all, or about all, who are now engaged in or by the banks were "evolved"
by that process, they naturally think that a more efficient service is thus
secured and wiser financiers produced.

"Accommodations" at banks are also granted by very different. methods
here from what they are with us. There is very little of the system of John
Smith taking his two neighbors to the bank and getting a loan for ninety days
on "personal security; " as a fact, this practice is almost or quite unknown.
Nearly all loans here are either on real estate, called simply "land," or they
are secured by liens on the stock, crops, or coming wool clip. The last
named are the most common, and a greater portion of the loans are made for
from six months to a year, with privilege of renewal, if things are satisfactory.

Many of the loans are carried on for years, with payments made as the
stock or wool clip is sold.



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** SQUATTERS AND STATION LIFE IN AUSTRALIA. IO3

In the practical operations of the banks here, the loaning branch of the
bosiness amounts to a vast system of overdrafts, and in this they would seem
to us more like loan associations than banks.

GEO. W. BELL,

Sydney, May 8, i8g6. Consul.



"SQUATTERS" AND STATION LIFE IN AUSTRALIA.

What a ** ranchman*' is to us in Texas, New Mexico, or southern Cali-
fornia, a "squatter" is to Australia, and a ** ranch " in America corresponds
to a ''station*' in Australia. The land owned and leased from the Govern-
ment of Victoria occupies a vast territory. There are held by the different
squatters of the colony, freehold property to the extent of 7,107,234 acres.
These are divided among 868 owners. In addition to this freehold property,
the squatters also lease from the Government pastoral lands, grazing lands,
swamp lands, and mallee lands. The lands thus leased from the Govern-
ment aggregate 19,733,184 acres and yield a' yearly income of ;^88, 107
($428,772.71). The Government taxes the freehold property, provided it
aggregates in value over $12,500, at the rate of i^ per cent on Its assessed
valuation, and in assessing the property, $12,500 is always first deducted
from its value. For instance, if a property is valued at $25,000, it is only
taxed on a valuation of $12,500; if it is only valued at $12,500, it escapes
taxation. There is property for taxation belonging to the squatters estimated
at $60,000,000. The Government also imposes a sheep tax at the rate of
$5 to every 100 sheep.

There were estimated to be in the colony at the close of 1895, i3»iSo>-
943 sheep, and, adding to these the horses, cows, and pigs, the total live
stock aggregated 15,783,978. Nearly all this live stock, excepting, of course,
the small numbers owned by the farmers and private individuals, is the prop-
erty of the squatters, and the income derived by them from their business of
sheep raising is something immense.

The mallee lands leased by the Government to the squatters are what was
once the site of a dense forest; the trees have been ''burnt,*' "rung" and
left to die, or have been cut down, and the land is full of roots. This here-
tofore rendered the land unfit for use of any kind; but of late years, they
have imported huge steam plows which tear these roots bodily from the
ground, with the result that the land is now available for grazing purposes,
and, in addition, is capable of producing excellent wheat.

A few words regarding the rates paid for labor on stations. These rates
include board and lodging, the men sleeping together in a hut and being
provided with good living. A stockman receives from $100 to $250 per
annum; a boundary rider, the same; a shepherd, from $65 to $325; hut
keepers, from $125 to $200. Generally useful men receive from $2.50 to
$5 per week; sheep washers, from $3.75 to $7.50 per week; and shearers,
from $3.75 to $5 per 100 sheep shorn. Considering that some of these



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I04 ** SQUATTERS AND STATION LIFE IN AUSTRALIA.

shearers shear their 200 sheep per day, it can be seen that they make rather
good wages during the shearing season.

Let me give a description of a visit to a station in Victoria. This station is
not by any means the largest in Victoria, but for the improvements to the prop-
erty, the irrigation, and the general care expended, it may safely be said to be
one of the show stations of the colony. Tooloowoomba is the name of the
station, and it comprises about 70,000 acres freehold. Mr. Howe, the pro-
prietor, rents from the Government about 30,000 acres more. This latter
land he rents with the understanding that when he has rented it ten years,
he shall have the privilege of purchasing it from the Government at the rate
of from I7.50 to ;Jio per acre, it being understood that the amount he has
paid for rental shall apply on account of the purchase; so that, at the end of
the ten years, if he elects to purchs^se the property, there will be a compara-
tively small amount to be paid. The estate has 26 miles of river frontage,
the river being very winding, running thoroughly through the estate, so that
they are never at a loss for water. At many stations the want of water dur-
ing the summer season is a serious matter, it being a common occurrence
for squatters to lose numbers o£< their stock from this great need. About half
a mile from the house is situated the **hut,*' or the men's quarters. Here
are 100 or 150 workmen, who live well and are comfortably housed. A
cook presides over the hut. About 2 miles further, right through the bush,
is an extensive open field, in the midst of which is built the wool sheds.
There are pens adjacent into* which the sheep are driven previous to being
shorn. The wool sheds are very extensive, and are capaple of accommoda-
ting 300 shearers at once. Mr. Howe has about 70,000 sheep which are
dispersed in flocks about the estate, the largest flock of about 6,000 being
on a mountain side in a large paddock. When the shearing season arrives,
these separate flocks are driven by the shepherds and sheep dogs to the wool
sheds and there are washed and shorn. There is also here an apparatus for
giving the sheep an enforced bath in a preparation for curing "tick,'* a dis-
ease prevalent among the sheep. They walk along through a sort of passage-
way and suddenly find themselves submerged in a bath of this preparation.
It contains a strong alkali, warranted to destroy the **tick." Foot rot is
also very prevalent among the sheep, and it is a common sight at the wool
shed to see men cutting away the feet of the sheep till at last the poor animal
is allowed to escape maimed and bleeding. Often this foot rot gets beyond
control, and, extending up the leg, incapacitates the sheep from action, so
that he ultimately dies from starvation.

Mr. Howe's sheep are the finest in the colony, and it is owing to his excel-
lent breeding. Six or eight years ago he visited Vermont and brought over a
flock of 100 choice American merinoes. These have now increased to 1,000
or 1,500, and, in addition, he crossbred the American rams to Australian ewes
and thus produced a wool the texture of which is unsurpassed. Mr. Howe's
annual income from the sale of his wool amounts, on an average, to |8o,ooo.
Of course, his wool clip differs according to the weather and the condition
of the sheep during the different seasons; but the above is a fair average.



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*' SQUATTERS AND STATION LIFE IN AUSTRALIA. I05

It has been wondered how it is that Australia can produce wool, and for
that matter, sheep, so much more cheaply than America, and the answer
to that is very simple. First, the advantage lies in the climate. Here, you
have a climate where the sheep can, and do, safely spend every night during
the year in the open air and without covering. Then, the pasturage is un-
limited, and, virtually, free. The cost of labor is cheaper than with us, and
station living is cheaper, and all these things combine to cheapen the ani-
mal. You can purchase at a retail butcher's here in Melbourne prime lamb
and mutton at from 5 to 6 cents per pound.

One thing the squatter has to guard against and ever be on the watch for
is a bush fire. They are like our prairie fires. In the summer season, the
grass becomes dry and inflammable, and the squatter is awakened in the night
by a fire roaring on some part of the station. Then all hands must turn out
to fight the flames, and it is often days before they succeed in stopping them ;
it is generally done by clearing a broad space, so that when the fire reaches
this space, it has nothing to feed on.

In addition to wool, the squatters raise wheat and barley, though, as a
rule, the larger squatters do not care to devote their time to farming, prefer-
ring to give all their attention to sheep raising. A rule that is universally



Online LibraryUnited States. Dept. of Commerce and Labor United States. Bureau of Foreign CommerceConsular reports, Issues 196-199 → online text (page 16 of 82)