Before Federation: To 1900
Rum, Shinplasters, Holey Dollars & More
When the colony of New South Wales was established, no provision was made for an internal currency. There were no banks for some time and of course no central bank. This produced a period of chaotic currency arrangements and experiments in the colony.
In the early years, the colonists had to rely on barter – the exchange of produce, goods and services – and other makeshift currencies such as rum (as all spirits were then called).
Coin was very scarce in the early years with England also suffering from a coin shortage.
The Spanish dollar was a major international currency of the time. A shipment of Spanish dollars was sent from England in 1792.
Coins from a range of other countries were also used such as Dutch guilders and ducats, Indian mohurs and rupees and Portuguese johannas. But much of this coin left the colony as a result of trade with visiting merchant ships.
Governor Macquarie also tried to remedy the coin shortage by the creation of the holey dollar. He had the centres of Spanish dollars punched out, leaving a ring (the holey dollar) valued at 5 shillings and a dump or core valued at one shilling and threepence. Despite stiff penalties for exporting this coin, it remained scarce.
The Commissariat, which controlled the issue of stores to troops and convicts, bought goods produced by private enterprise, paying for them with store receipts. These receipts served as a medium of exchange up to the 1820s but they were for unwieldy amounts. The Commissariat began to issue its own notes, which were equivalent to those of the Bank of New South Wales, established in 1817.
Because of the persistent shortage of coin and the limitations of other currencies, promissory notes or IOUs also soon came into general use. Squatters' cheques were a form of IOU in specific districts. These IOUs, however, were vulnerable to forgery and had no collateral backing.
Promissory notes became known as shinplasters, a term describing a paper currency thought to be only worth soaking in vinegar as a poultice for bruises. These notes mostly fell apart quickly in the pockets or boots of customers, thereby saving the issuer from having to redeem them in coin.
From the late 1840s, copper tokens were issued by businesses as small change to relieve the coin shortage but, like paper IOUs, had no backing or official guarantee.
With no adequate solution to the currency problem, the British Government had legislated a sterling currency for the colony in 1825.
'Pounds, shillings and pence' remained in place as the basis of Australian currency until the introduction of the decimal system in 1966.