The Australian Bank Crashes of the 1890s Revisited

David T. Merrett

No 15, CEH Discussion Papers from Centre for Economic History, Research School of Economics, Australian National University

Abstract: Financial crises occurred in many countries in the early 1890s, most of which were connected to international capital flows. Australia, a major importer of capital, had difficulty borrowing after the Baring crisis. This paper argues that the consequences of the banking crash in early 1893 were shaped by local factors. A fortuitous legislative change averted a calamity by allowing for reconstruction rather than liquidation of banks; economic activity was depressed as banks became more conservative lenders; and the reconstructions reduced the wealth of domestic bank creditors and shareholders. We conclude by noting that there was no targeted policy response in the short or medium term to prevent a recurrence of such an event.

Date: 2013-05
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Persistent link: https://EconPapers.repec.org/RePEc:auu:hpaper:015

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