During the 1880s, Victoria enjoyed the world’s highest standard of living.
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Money poured into Victoria from Britain to develop the colony’s infrastructure and to expand its pastoral industry.
For example, beginning in 1881, Victorian rail lines were pushed out towards the Murray and then into the NSW Riverina to capture wool transport from river steamers — and NSW.
In Melbourne, an Inner Circle line and an Outer Circle line were under construction by 1888.
These were intended to encircle central Melbourne, enabling Melbourne’s railways to overcome their hub and spoke design.
The 1880s decade also saw a housing boom.
Almost unregulated, the banking sector lent aggressively to fund this boom.
In the strongly rising Victorian property and pastoral market, British banks gained larger profits than in their mature markets at home.
Then, in 1890, Baring Brothers bank came under pressure in Argentina.
The Argentinian wheat crop failed that year.
Worse, there was a coup in Buenos Aires.
Suddenly British banks found themselves exposed to heavy losses in their lending to Baring Brothers.
It took little for uncertainty and then panic to begin with other colonial lending.
British banks began to call in their loans to Australian banks. This led to runs on the Australian banks.
The Victorian Government declared a five-day bank holiday to stop the runs.
It did not work. By August 1891, the first bank had closed its doors.
During the next two years 54 banks failed. Fifty-six per cent of all bank deposits were frozen. Thirty-four banks would never open again.
British capital investment in Australia fell drastically.
As Australian banks searched about for funds to cover their British loans, they called in customers’ loans and overdrafts.
Businesses and individuals went bankrupt by the thousands.
To make matters worse, a series of general strikes began in 1890.
Mainly confined to the maritime unions, coal miners and shearers, the four strikes, from the union side, were designed to improve wages in lean times and stop the carriage of non-union wool on ships.
More than 80000 workers were involved.
From the employers’ side, their reaction was aimed at crushing the unions and the young Labor Party, which had won its first seats in 1891.
Police, soldiers and the courts were used to defeat the strikes.
During the strikes, membership of the Wharf Labourer Union shrank to 800 — from 2000 members.
With a third of Victorian workers unemployed, these strikes were always going to fail.
By 1893, the depression grew to be the worst in Australia’s history.
At that time, there was only aid from charities, not government social welfare.
For many, abject poverty and starvation became realities.
If that were not enough, the Federation drought, Australia’s third worst, began in 1894.
It would last until December 1902.
After the Great Depression of 1893, Australia never recovered her high standard of living.
The cost of the Great War ensured the continued fall in living standards.
In 2016, Australia was rated 16th.
— John Barry, Coo-ee