First Settlement
When Australia was settled in the late eighteenth century, the limited opportunities for trade were quickly exploited. The first group of merchants were the civil and military officers who resold imported goods such as tea, sugar, tobacco, and spirits, through intermediaries, to the settlers. It was not business acumen that allowed these men this position, but their virtual monopoly on foreign exchange through paymaster’s bills and Treasury bills. The latter were given in exchange for store receipts issued by the commissariat as payment for wheat and meat. The officers acquired a large proportion of these receipts through their trading activities.
The extension of credit by these officer merchants was generally of fairly low risk, since their customers on the retail level were rapidly becoming wealthy by foreclosing on debts owed by settlers who had been extended credit on the basis of mortgage securities.
Three Decades of Colonial Trade
This monopoly was gradually weakened by the appearance of other merchants: professional merchants from Indian or English houses as well as emancipist traders.
These merchants stimulated the economy by engaging in maritime and other activities in the search for export commodities that would provide foreign exchange. The officer merchants had previously paid for their imports in Treasury bills.
In contrast, many of these new merchants had overseas trade connections, and a credit chain was established from the foreign exporter down to the settlers.
With little control over the amount of credit thus extended, the value of imports rapidly increased and soon exceeded the colony’s ability to pay. These conditions exacerbated by severe droughts, caused depression and financial difficulties for many colonists in the period between 1812 and 1815.