A New Currency: 1900–1920
Preparing the Way
The Governor-General, Lord Hopetoun, proclaimed the Commonwealth of Australia under the Federation Pavilion in Centennial Park, Sydney on 1 January 1901. Edmund Barton became Australia's first Prime Minister.
The first Federal Parliament met in Melbourne in May 1901, pending the selection of a site for the Federal Capital.
The Constitution empowered the Parliament to make laws in relation to 'Currency, coinage and legal tender' and 'Banking… and the issue of paper money'. But it was not until 1910 that legislation – The Australian Notes Act – passed through Parliament.
Under this Act, control over the issue of Australian currency notes was given to the Commonwealth Treasury. The Bank Notes Tax Act, also in 1910, imposed a 10 per cent tax on all private bank notes, effectively discouraging, though not prohibiting, their issue.
Bank Notes of the Early 1900s
Up to 1910, notes issued by the private banks and the Queensland Government continued to circulate as Australia's paper currency.
The total amount of notes that banks could issue was limited by their gold reserves.
Like many other countries around the turn of the century, Australia adhered to the gold standard.
This meant that the value of currency notes was measured in terms of gold and the banks had to carry enough gold at all their branches to redeem notes on request for gold coins. Private bank notes were not legal tender as that term is now understood. The public did not have to accept them from a bank.
Superscribed Bank Notes
Though the 1910 legislation for a national currency was in place, the new nation was ill-prepared to move quickly to issue its own currency notes.
As an interim measure the Australian Government issued superscribed bank notes.
The Government overprinted notes purchased from the private banks with the words:
Payable in Gold Coin at the Commonwealth
Treasury at the seat of Government
This superscription was signed by JR Collins (Accountant) and GT Allen, Secretary to the Treasury.
These superscribed notes were Australia's first currency notes that were acceptable across the nation.