ABSTRACT
Australia experienced one of the most interesting historical experiences of free banking. Australian banking was relatively free for almost a century, from the establishment of the first banks in the second and third decades of the last century until well into the twentieth, and fully fledged central banking only arrived with the establishment of the Reserve Bank of Australia at the comparatively late date of 1959. The Australian experience of free banking is of particular interest to students of banking history because the legal framework within which banks operated was perhaps the least restrictive of any on record, and the banking system was largely free of significant government intervention until the 1890s. Australia never had ‘pure’ laissez-faire in banking, but Australian banks operated under relatively innocuous legal restrictions compared to many ‘free banks’ elsewhere, and the legal restrictions that did exist were frequently disregarded anyway. The comparative purity of the Australian case ought therefore to give us a reasonably fair indication of how well the theory of free banking has worked in practice.
