In the United States, Canada, South Africa, and Australia, 19th century gold rushes either brought people and capital to far corners of the world or shifted people around these regions from farms into mines or goldfields. They differed in their precise effects but were almost always the most significant economic events in their respective areas’ histories. Australia drew hundreds of thousands of settlers, mostly from Britain though to some extent from China too, as a result of mineral booms the most notable of which were the gold rushes of the 19th century. The first of these took place in the Australian colony of Victoria in the 1850s.
Bathurst, Ballarat, and Bendigo
Victoria’s gold rush actually began in a neighboring colony in January 1851. Gold was found near Bathurst in New South Wales by Edward Hargraves. He was a gold prospector who had returned home to Australia from California where he participated in the 1849 gold rush there. Hargraves was one of perhaps around 11,000 Australians who travelled to California during the California Gold Rush. Thus, many in Australia were familiar with the experience of California and the work of prospecting for gold.
The Sydney Morning Herald reported the Bathurst find, drawing attention to the discovery. Though Australian gold had been found by others before, the publicity had never been so great. Later in 1851, more gold was found in Victoria at sites near what is now Castlemaine (then known as Mount Alexander), at Ballarat, and at Bendigo (then Sandhurst), all northwest of Melbourne and quite far from the Bathurst find. Most of these lands were crown lands, owned by the state, but very quickly licenses were created to allow private prospectors to access the new goldfields.
Influx of People
In response to the news, people left other parts of Australia for Victoria. The population of South Australia and Tasmania, which sat out this gold rush, actually fell in 1852, quite unusual for a quicky populating part of the world. By contrast, in Victoria, new towns sprouted up in the goldfields, often hastily constructed.
More significant than the internal migration was the large amounts of immigration from abroad, largely from Britain, that the gold rush prompted. Tens of thousands of people transited through or settled in Melbourne, which became Australia’s largest city. Around 100,000 people arrived in Australia per year at the peak. One of these was the merchant and banker Joseph Barrow Montefiore, an agent for the Rothschild banking family, who arrived in 1851 after a journey of 92 days as was typical at the time. Besides those arriving from Britain, there were 20,000 Chinese miners living in Victoria by 1855 and 13,000 in New South Wales by 1861.
Overall, Australia’s population nearly tripled in a decade and that counts regions little affected by the gold mania. In the early to middle years of the decade, the population was growing between 10-17% per year. In Victoria specifically, the population tripled in far less time, in just three years between 1850 and 1853, and grew seven times over the decade.
Production
The gold found in Victoria was particularly fine and pure, increasing the yield of the ore removed from the earth. About three months after the finds in Victoria were announced, £100,000 in gold was already being discovered per week. By 1854, nearly 8.5 million ounces of gold had been exported through Melbourne generally earning prospectors £3 per ounce as compared to the £3, seventeen shillings, and 10.5 pennies mint price for gold. The rate of extraction did slow, but only barely. By 1860, twenty million ounces of gold would be dug out of Victoria and another two million ounces in New South Wales.
Influx of Money
This gold in Australia could be found at the surface or embedded in reefs of quartz rock. Prospecting for ‘alluvial’ gold deposits, those near the surface, does not require much capital; earth doesn’t need to be removed or tunneled through. Little digging was done. While the type of gold finds here meant extraction was not labor intensive and was even less capital intensive, investment nonetheless came flowing in to Australia. To start, some seventy different mining companies were proposed and twenty-eight raised at least some capital successfully. About £1 million was raised, much of it in London. Despite the large sums raised, the companies generally employed just a few dozen people each; the nature of the Australian goldfields did not require the organization of large companies with large numbers of employed miners.
Another source of monetary inflow into Australia came in the form of export receipts. Exports from Victoria and New South Wales, taken together, surged from £2.4 million in 1850 to £15.6 million in 1853. Gold exports grew to be three times more valuable than wool exports, the region’s most important commodity in pre-gold rush times. The change was massive. Some £87 million in gold was extracted in Australia over 1851-1860; compare this to an estimated 1850 GDP of around £13 million.
Gold dust was accepted by Victorian banks and the resulting credits to bank accounts brought bank deposit balances from £820,000 to £4.3 million in 1852 alone. Though there was far more money now circulating in the form of bank balances, actual coined money was scarce. Australia may have had plenty of gold but the metal had to be shipped to Europe to be refined and minted into coins then sent back to Australia. Still, the money supply was much enlarged.
Further adding to the local money supply, the government of Victoria borrowed from abroad as its creditworthiness rose as a result of the boom. The government had to pay higher wages to its workers, to stay competitive with mining employment, and also invested a lot more in infrastructure like roads. The government spent £520,000 on new roads in 1853 as compared to just £11,000 in 1851. New officials also had to be hired to administer and police the goldfields, which were the scene of many disputes and even organized rebellions against government policy towards the miners.
Wages and Prices
The allure of the goldfields and swelling money supply meant wages rose 250% in Victoria. Some made even more. A carpenter may have earned a little over £100 in 1850 but over £400 by 1853 for a full year’s work. That said, earnings in the goldfields fell as the most easily-found gold was taken. Economic historian Tony Dingle estimates that in 1852, the average miner made £390; this fell to £240 in 1853 and £148 in 1854. Still, there was a massive temporary increase in earnings for workers, whether in the goldfields or not, and £148 was still a good nominal wage compared to pre-boom years.
However, with an influx of money and people, and the long journeys to bring imports into the country, shortages of goods developed. Amidst these circumstances, the price of bread quadrupled between 1852 and 1853. The merchant and banker Montefiore was in Victoria during these years buying gold and selling merchandise to prospectors, goods like wine and spirits, dried fruit, nuts, sugar, preserves, and tobacco, at prices that were very profitable even if large transport costs ate meaningfully into the profits.
By 1854, prices for domestic goods of a sort that faced some competition from imports rose 60% and those for which no imported alternatives existed, the non-tradable sectors of the economy, prices rose 200%. These numbers came from New South Wales but probably a similar or even more severe inflation occurred in Victoria. So, many miners barely made a living despite finding gold.
Legacy, Lasting and Not
Australia’s wool industry took a back seat during these years. Mining briefly accounted for about 35% of Australia’s GDP. Gold replaced wool as the top export and only in 1871 would wool once again overtake gold. The inflation in wages and prices stunted growth in the wool industry which struggled to pay competitive wages. Compare the estimated average miner earnings of nearly £400 to pre-boom annual wages in any of an array of jobs, including shepherds’ wages, of just around £100.
As it happens, wages for shepherds rose by less than in other sectors in the aftermath of the gold rush but they still doubled! That said, with hiring constrained by high labor costs, the industry’s capacity was limited. Thus, the sheep population may have grown in the 1850s but by just about one-fourth the rate of the 1840s. One positive development, during these years, the wool industry learned to be more efficient in using expensive labor.
Other industries also suffered or at least stagnated. The number of manufacturing firms in New South Wales, for example, fell from 165 in 1850 to 140 in 1852. Shortages of labor in non-mining work, including in a variety of crafts work, meant reliance on imports increased. For instance, people bought new boots and shoes because it was too expensive to hire someone to mend old ones.
The struggles faced by employers outside of the goldfields did dissipate. Miners’ earnings generally fell with time as did wages in other parts of the economy as prospecting for gold became less of a draw. By 1856, wages for carpenters and general laborers had declined 40% or more in Victoria from their 1853 levels.
The gold rush continued to decelerate into the next decade. Production had fallen from three million ounces per year in the 1850s peak years to two million ounces per year and would fall still further, to 1.5 million ounces in 1870s and just above one million in the 1880s. Still, these are large figures nonetheless. So, what happened to all of the mining companies formed at the onset of the mania? As it happens, the companies almost all had disappointing outcomes. Many bought or leased land sight unseen, with poor results. Fraud, disputes, delays, and poor output of individual sites all cost the investors in these companies much or all of their original investments.
Population growth was perhaps the most important long-term legacy of the gold rush. The population growth stimulated industries other than gold when the mining craze diminished. More people meant there was need for more buildings and this stimulated demand in sawmilling and brick-making. By 1861, the enlarged city of Melbourne had a population larger than Chicago’s and was more than twice as large as San Francisco. The countryside provided more food to the larger cities and towns and connecting countryside, towns, and the goldfields were new roads.
So, despite the inflation during the peak of the boom years and the deflation that came thereafter, the economy continued to grow. People who came for the gold stayed in other jobs. Wages after the boom fell but, in 1860 they were still 70% higher than 1850 levels, though it must be noted that real wages, adjusted for inflation, were about flat as compared to 1850 levels. In any case. This was not a one-time occurrence. Future gold rushes took place in Queensland in 1867 and thereafter in the Northern Territory, in the Kimberley and Pilbara regions in Western Australia, and in Tasmania. At the end of the century, gold extraction again hit three million ounces per year, the peak rate of the 1850s.
Lesson
The gold rush in Victoria had large and numerous effects on Australia. One of these though, and perhaps the most significant at the time, proved temporary and underwhelming and that was the windfall to the miners. The gold money left Australia as quickly as it came, to a large extent with imports of goods that were not being made locally as people rushed to the goldfields. Almost certainly, certain other industries were held back by the gold rush. Inflows of money from resource booms, if not managed like in the manner Norway handles its oil money, is often frittered away. Still, the gold rush of 1850s Victoria did have a large and lasting legacy but it was through the people and infrastructure it brought to Australia that the gold rush accelerated the country’s development.
More from the Tontine Coffee-House
Read about gold rushes in California and South Africa and even the financial effects of the latter in faraway Constantinople. Consider subscribing to this blog’s newsletter or checking out book recommendations, which include many of the sources often referenced in my posts.
Further Reading
1. Bashford, Alison, et al., editors. “The Gold Rushes of the 1850s.” The Cambridge History of Australia, Cambridge UP, 2013.
2. Battellino, Ric. “Mining Booms and the Australian Economy.” Bulletin – Reserve Bank of Australia, Mar. 2010.
3. Maddock, Rodney, and Ian W. McLean. “Supply-side Shocks: The Case of Australian Gold.” Journal of Economic History, 4th ed., vol. 44, Dec. 1984.
4. Trumble, Angus. “The Rothschilds, the Montefiores, and the Victorian Gold Rush.” www.rothschildarchive.org.
5. Woodland, John. Money Pits: British Mining Companies in the Californian and Australian Gold Rushes of the 1850s. Routledge, 2016.
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