BARRON GORGE, BELOW THE FALLS, CAIRNS RAILWAY
Administration followed, but could not in such a time of value shrinkages materially increase revenue, while expenditure was thought to be irreducible. Despite a Loan Act for 1½ millions passed in 1888-9, to provide for works temporarily met by floating Treasury bills during the two preceding years, another large loan was authorised in 1890, its total being nearly 3¾ millions sterling. This money was needed to retire debentures maturing on 1st July, 1891, amounting to £1,170,950, and no less than £422,850 deficiency loss on the loans of 1882, 1884, and 1889, thus leaving little more than 2 millions for railway and harbour works. This 3¾ million Loan Act did not receive the Royal assent until December, 1890, and the stock was issued a few months later at a most unfortunate time. The monetary tension which culminated in 1893 was already felt in the London market, and the credit of Queensland had become much impaired by the fact that during the preceding decade (1880-81 to 1889-90) the colony's obligations had increased by £16,706,834, bringing the funded public debt up to £28,105,684—nearly £70 per head of the population—while railway net earnings were steadily dwindling.
The cable soon flashed the unwelcome news that only £1,554,834 was subscribed. After some difficulty a Stock Exchange syndicate was formed to underwrite £1,182,400 of the balance, the price realised for the whole amount taken up averaging £87 6s. 1d. per £100 of 3½ per cent. stock. Thus the net proceeds of the loan of £3,704,800 were only £3,234,376, a depreciation loss of £470,424. The interest charge on this new loan was £129,668; so that the interest, while nominally 3½ per cent., was really just 4 per cent. on the money received, and, in addition, at due date (1930), £470,424 depreciation will have to be made good. But the tragedy did not end there, for the money borrowed, or the greater part of it, had not reached the Treasury in 1893, but ranked among the "suspended bank deposits" which then paralysed both Government and private depositors.
That the time chosen for going on the money market was not opportune may be gathered from the fact that in 1889 Queensland 3½ per cent. stock had brought £96 0s. 11d. per £100, and in 1894—three years after the forced sale at £87 6s. 1d. in 1891—an issue of our stock of the same denomination brought £98 14s. 0¼d. per £100. It may be noted that the Queensland loan of 1890-91 was the first underwritten Government loan issued by an Australian colony, though since that time all Government loans have been underwritten. Heavy as our sacrifice in 1891 may have been, it was infinitely less disastrous than making default must have proved; and perhaps after all the experience gained was worth its cost, for, although the colony staggered under the blow, its progress was checked only for the time.
In 1890 an amending Audit Act was passed—Sir Thomas McIlwraith being then Treasurer—section 4 of which made the important provision that it should not be lawful for the Colonial Treasurer to expend any moneys standing to the credit of the Loan Fund Account except under the authority of an annual or special Appropriation Act, in like manner as moneys were expended out of the Consolidated Revenue Fund for the current expenses of government. By section 6 it was provided that, when it was necessary to expend for any work money in excess of the appropriation, then, if such sum were included in any Appropriation Act, the Governor in Council might authorise the additional expenditure from the Loan Fund. By section 8, annual Loan Estimates, specifying the nature of the work proposed, were to be submitted, as in the case of the Estimates of ordinary expenditure. This Act was passed to avoid the evil of placing large amounts of borrowed money at the uncontrolled disposal of the Ministry of the day.