There was a legend diligently circulated during the reconstruction period which followed the failure of the banks in 1893, that the disasters of the time were due to the crass stupidity of British depositors, who, without any real justification, withdrew their confidence from the great financial institutions of Australia; and that this withdrawal of confidence received its original impetus from the labour disputes and social unrest which afflicted all the eastern colonies from the year 1884 onward. That there were fierce labour disputes and much social unrest during the period mentioned will be seen from the chapters devoted to labour and industry, but it will also be discovered that this unrest and these disputes were merely symptoms of a disease with which the whole industrial and financial life of Australia was then afflicted. A study of the financial history of Australia from 1872 to 1893 shows that the causes of the crisis were deeply rooted in the events of the middle part of the period, which produced a thoroughly unsound condition of business and did much to justify the distrust and panic which culminated in 1893.

The development of the country had proceeded very slowly from the close of the gold period until 1873, and in the case of some colonies until even later, but was then materially hastened owing to the expenditure of money obtained in Great Britain by the various Governments and by private capitalists.