History of pound sterling in Oceania facts for kids

Kids Encyclopedia Facts

The Sterling was the money used in many parts of the British Empire. This article tells the story of how sterling was used in Australia, New Zealand, and the Pacific islands.

How British Money Spread Around the World
The Sterling Money Club
- Australia Gets Its Own Coins
Australia's Money Journey
New Zealand's Money Journey
Fiji's Money Journey
Money in the Western Pacific Islands
See also

How British Money Spread Around the World

After Britain won the Battle of Waterloo in 1815, it became a very powerful country for about 100 years. At that time, the British Empire included places like the West Indies, parts of North America, and the new colony of New South Wales in Australia. Britain also gained more lands like Malta and Mauritius after the Napoleonic Wars.

This was a great time for Britain. In 1817, the Royal Mint in London started making a new gold coin called the gold sovereign. Meanwhile, the Spanish Empire was getting weaker. The silver Spanish coins, called "pieces of eight," which had been used all over the world, became harder to find.

Britain had a successful "gold standard" by 1821. This meant their money's value was directly linked to gold. So, in 1825, the British government decided to introduce sterling coins in all its colonies. They set rules for how much sterling coins were worth compared to other foreign coins already in use. This was meant to make it easier to switch to sterling.

This plan didn't work well in some places, like the British colonies in North America. But in New South Wales, there wasn't a strong money system already in place. So, British sterling money was adopted quite easily there. As Britain's influence grew in the 1800s to include the rest of Australia, New Zealand, and many Pacific islands, British sterling money followed.

The Sterling Money Club

From the late 1800s until World War I (1914-1918), many parts of the British Empire were in a "monetary union." This meant they all used money that was based on the British gold sovereign. This "sterling club" included Australia, New Zealand, many Pacific islands, parts of Africa, and the West Indies.

The British government had wanted all colonies to use sterling since 1825. But by the 1860s, they stopped trying to force it in places like Canada and British India. These places already had their own money systems.

This sterling money club worked because all the money was linked to gold. During this time, standard sterling coins made in London were used in the United Kingdom, Australia (and its territories like Papua New Guinea), New Zealand (and its territories like Western Samoa), Fiji, and the British Western Pacific Territories. Banks in England, Scotland, Ireland, Australia, and New Zealand also printed their own banknotes.

Australia Gets Its Own Coins

In 1910, Australia started making its own coins. They looked very similar to British sterling coins but had special Australian symbols on the back. At the same time, a new bank called the Commonwealth Bank became the only one allowed to print Australian banknotes.

This didn't really change the monetary union. At first, Australia's new coins were still made in London. This was because the Royal Mint branches in Australia (in Sydney, Melbourne, and Perth) could only make gold sovereigns. But by 1916, Australian coins were being made locally in Australia.

When World War I started, countries stopped paying out gold for their paper money. This meant the link holding the money club together was broken. Paper money in different places could now have different values. Australia already had its own coins, so it wasn't a big problem there. For New Zealand and Fiji, it became an issue later during the Great Depression.

The Great Depression in the 1930s caused big changes in how much different "pound" units were worth. By 1934, both New Zealand and Fiji started making their own versions of sterling coins.

Australia's Money Journey

Australia went back to the gold standard in 1925, just like the United Kingdom. This meant the Australian pound was officially worth the same as the British pound. For a while, money transfers between London and Australia had been a bit off, but people thought it was just a temporary problem from the war. No one really thought the Australian pound was a separate currency from sterling.

However, in 1929, the Great Depression hit hard. Countries that produced raw materials, like Australia and New Zealand, felt it first. Australian banks started selling the Australian pound for less money. This made Australian exports cheaper and more competitive. Australia also stopped linking its money to gold. Suddenly, the Australian pound was worth 25% less than the British pound sterling.

When the United Kingdom also stopped linking its money to gold in 1931, it raised questions. What did an Australian pound mean if it wasn't connected to gold anymore? After 1931, it was decided that the Australian pound would always be worth 25% less than the British pound sterling. So, it stayed closely connected.

When World War II started in 1939, Australia joined the "sterling area." This was a special wartime plan to protect the value of the British pound, especially against the US dollar.

In 1966, Australia changed its money system to a decimal one. The Australian pound was replaced by two new Australian dollars. When the British pound lost some value in 1967, the Australian dollar didn't follow. It stayed linked to sterling at a new fixed rate.

Later, in 1971, Australia changed its money's link to the US dollar. In 1972, the "sterling area" (the group of countries with linked money) became much smaller, only including the British Isles. Australia changed its own money laws to match. When the British pound's value started to "float" (change freely) in June 1972, the close connection between the Australian and British currencies finally ended.

New Zealand's Money Journey

Unlike Australia, New Zealand didn't have a central bank or a main money authority between 1914 and the Great Depression. New Zealand's money was linked to the British pound only through the gold standard. When the gold standard was paused during World War I, the link was just based on old habits. Banks controlled how much money transfers between New Zealand and London were worth. So, they set the exchange rate.

New Zealand's money was effectively linked to sterling, mostly controlled by Australian banks. This link became a "gold exchange standard" between 1925 and 1931 when the UK was on a gold standard.

It wasn't until the Great Depression that Australian banks made the New Zealand pound worth less than the London pound. Exports from Australia and New Zealand were badly affected by the depression. To help sell more goods, the Australian banks decided to sell the New Zealand pound at a 9% discount. By 1931, 110 New Zealand pounds were equal to 100 British pounds sterling.

This caused some confusion because the Australian and New Zealand pounds were still worth the same as each other, even though their value against the British pound was different. By 1933, both the New Zealand pound and the Australian pound were worth 20% less than the London pound. This meant 125 New Zealand pounds equaled 100 British pounds sterling.

New Zealand joined the sterling area in 1939 when World War II began. In 1948, the New Zealand pound went back to being worth the same as the British pound sterling.

In 1967, New Zealand also changed its money to a decimal system, replacing its pound with two new New Zealand dollars. Later that year, when the British pound lost value, New Zealand used the chance to make its new dollar worth the same as the Australian dollar.

In 1971, New Zealand changed its money's link to the US dollar. In 1972, like the United Kingdom and Australia, New Zealand ended its money laws based on the sterling area.

Fiji's Money Journey

From the time Fiji became a British colony, British sterling coins were used there. Local paper money was also printed. In 1917, during World War I, Fiji's treasury printed paper money instead of using British gold coins.

During the Great Depression in the 1930s, banks in Australia and New Zealand made their pounds worth less to help their exports to the UK. These same banks controlled Fiji's exchange rate. In 1933, the Fijian pound was also made worth less to match the New Zealand pound. This meant £1.2.2 Fijian equaled £1 sterling. Soon after, the New Zealand pound would drop even further to match the Australian pound.

When World War II started in 1939, the sterling area was created to protect the value of the British pound, especially against the US dollar. Fiji joined the sterling area right away.

When the British pound lost value on November 20, 1967, Fiji followed immediately. However, over the next week, Fiji thought about how this would affect imports and watched what Australia and New Zealand would do. On November 28, 1967, Fiji decided to increase its pound's value a little. This meant £104.10.0 Fijian equaled £100 sterling. This brought the Fijian pound closer to its value against the Australian and New Zealand pounds before the Great Depression.

In 1969, the Fijian pound was replaced by the Fijian dollar. One Fijian pound became two Fijian dollars, making the new Fijian dollar worth about the same as the new dollars in Australia and New Zealand.

In June 1972, the United Kingdom stopped its sterling area money laws and let the pound sterling's value change freely. On June 30, 1972, Fiji passed similar laws, ending any official link between British and Fijian money.

Money in the Western Pacific Islands

The British governor in Fiji was also in charge of other Pacific islands as the High Commissioner for the Western Pacific. This included places like the British Solomon Islands Protectorate, New Hebrides, Nauru, the Pitcairn Islands, the Gilbert and Ellice Islands, and the Kingdom of Tonga.

In the mid-1930s, there was confusion in these islands about whether their "pound" money meant a British pound or an Australian pound. It was decided that all money accounts in these territories, except for the Pitcairn Islands, should be understood as the Australian pound. This was confirmed for the British Solomon Islands in 1935.

Territories directly controlled by Australia, like Papua New Guinea, also used the Australian pound. Places controlled by New Zealand, like Western Samoa and the Cook Islands, as well as the Pitcairn Islands, used the New Zealand pound.

So, there were now three different "pound" units used in Australia and the Pacific: the Australian pound, the Fijian pound, and the New Zealand pound. None of them were worth the same as the British pound sterling. However, as mentioned earlier, the New Zealand pound did go back to being worth the same as the British pound sterling in 1948.