2.4 Australian Gold Glitters across the Seas
There was another exceptional hallmark in the 1850s. Australia was perhaps
more important in the world economy than ever before or after. Australians—
though few in numbers—represented one of the main global markets at a time
when Britain was the world’s leading manufacturer. A heavy exporter and
importer, Britain’s cargoes from England to the wealthy Australian cities were
on a very large scale, and included enormous quantities of shoes and boots,
alcoholic spirits, and other costly or luxurious items that were in high
demand. In 1853 a total of 15 per cent of Britain’s exports went to Australia.
Was there ever, in modern history, another example of so few people exercis-
ing such purchasing power and, in the process, helping to revive the world’s
most influential economy? (Blainey 1963, ch. 5).
The global economy in the mid-1840s had been depressed, and its revival in
the following decade owed much to the enormous purchasing power gener-
ated by the two main goldfields, California and south-east Australia. One
characteristic of the 1850s was rapid inflation globally, which came after
one-third of a century of falling prices (Blainey 1963, pp. 62–3). There has
long been debate about the major causes of that decade of unusual inflation,
but one cause was the world’s mental reaction to the soaring output of gold.
The conviction was strong that the astonishing surge in the world’s annual
gold output would lead to a fast rise in the general price level. In short, the
anticipation of higher prices became, in the inflationary 1850s as in the
inflationary 1970s, a cause of higher prices.
The parallels between those two decades of extreme inflation—decades 120
years apart—deserve a brief comment. Central to the inflation was the behav-
iour and influence of two strategic commodities, New World gold in thefirst
period and Middle East oil in the second (McLean 2013, ch. 9). Now that gold
is no longer a pivot of thefinancial and banking systems we forget how pivotal
it once was. Gold was then, like oil is today, a strategic commodity.
In essence, Australia in the 1850s—perhaps for the only time in its history—
held an unusually powerful role. In the two world wars it held no such role.
Even its long-term pre-1980 role as a vital source of wool for the world, and its
recent role as a vital supplier of minerals to a powerful China, cannot realis-
tically be compared to its dynamic influence on the world’s economy in the
1850s.
2.5 Wool and Gold: Two Commodities that Wed
Between 1851 and about 1910 Australia had two dominating but rival
exports—gold and wool. Probably no other country held such a mix of
Geoffrey Blainey