There is an extensive historiography of colonial Queensland which concentrates on social and political aspects of development. Political decisions were made—for instance, to expand the railway system, to increase immigration and to support lower levels of government financially—and debated by historians without any discussion of the economic underpinnings of the colonial government. This thesis examines and assesses how those policies were financed. In relative terms, the Queensland Government was the heaviest borrower among the Australian colonies by a wide margin. In 1901, Queensland’s public debt per capita was £77/15/2, 50 per cent and 36 per cent higher than New South Wales and Victoria respectively. There were multiple causes of Queensland’s relatively high public debt. Along with other Australian colonies, Queensland had easy access to financing from the London capital market, broken only by London’s constraints on lending after the 1866 and 1891 financial crises in the colonies. Because of the colony’s unique characteristics, Queensland spent more borrowed funds per capita on railway construction than any other colony. Also, in pursuing its goal of rapid economic development through, inter alia, population growth, it spent more loan funds on subsidising European immigration than all other Australian colonies combined. Also, Queensland’s public debt was higher than other colonies because, uniquely, its Treasury Department operated as a central borrowing authority for all subordinate administrations, particularly local authorities and authorised industry bodies such as central sugar mills. Heavy reliance on borrowing for development expenditures became necessary because of colonial governments’ inability or unwillingness to mobilise other adequate sources of revenue. Unlike, for example, New South Wales, Queensland was unable to mobilise large amounts of land revenue and relied almost entirely on two taxation sources—customs duties on imported goods and excise duties on certain domestic production. However, these revenues were not available for public investment, being required almost entirely for the ordinary services of government.
Queensland sourced 88 per cent of its long-term borrowings from London between 1863 and 1900. Along with the other colonies, Queensland encountered significant risks in entering the London money market, including market risk, securities’ manipulation by London market operators and exchange rate risk. However, Queensland was demonstrably less adept than the other colonies in negotiating the London market vagaries—Queensland discounted its London loans by six per cent on average between 1863 and 1900 the highest loss by any colony. These losses were compensated by raising further loans, adding to the already high debt burden. However, the main risk of high public debt levels was that the Queensland Government might be forced into defaulting on its debt servicing obligations. Although this risk was high after the 1866 financial crisis, it became acute after 1888-89. Fortuitously, the Queensland Government did not default on its debt servicing payments after the emergence of the 1891 depression and the 1893 banking system collapse. However, the fiscal consolidation which the Government undertook between 1891 and 1895 to obviate debt default may have worsened and prolonged the effects of the depression. The thesis examines whether other less contractionary policies might have eased the effects of the depression.