No thought was given to establishing a system of currency when England set up a penal colony in New South Wales.
While the Commissariat (the colony administration) was responsible for feeding, clothing and housing the convicts; the military, the administrators and the free settlers needed to buy food, clothing and the other necessities of life.
Traders required a circulating legal tender for their supply of goods to these people, and despite the mixture of coinage that the free settlers brought with them from England and Europe, the settlement soon ran out of small change. Some sort of paper money was required and a few years passed before the best answer was found.
Within the first 40 years of the penal colony’s existence, nearly 100 traders in Sydney, Hobart and the rest of Van Diemen’s Land issued their own small change paper notes. Their buying power (as opposed to their face value) depended on the reputation of the issuing individual or trading house. (That’s to say whether the merchant could back his notes by specie) The early notes date from 1803 (M. Robinson Sydney) to 1828 (W. Lamb Hobart).
Currency and promissory notes issued by private note issuers are all rare and usually in poor condition. Denominations are expressed in Spanish Dollars, shillings and pence (in Spanish dollars at 5s each), sterling pounds, shillings and pence or in currency.
Commissariat Notes, while not intended for general circulation, were used as currency due to the lack of circulating cash. They were regularly redeemed for bills drawn on the English Treasury. Many were discounted by holders who could not wait three months for payment and endorsed the bills over to another person who would advance the original holder funds, less a discount for their trouble.
The Recipients of Commissariat Notes read like a Who’s Who of the colonies, but although the Commissariat operated from 1788 until 1870, its notes had become obsolete by the 1840s as the number of convicts declined and the accounts branch of the Commissariat was abolished in 1846.
The earliest private promissory notes date from the 1790s and survive as evidence of early deals between settlers as well as trade with England companies.
These notes differ from official promissory notes, commissariat receipts and traders’ small change issues in that they were used to settle individual business transactions. While a promissory note might have been discounted because of tight liquidity at the time, actual payment was usually for a larger amount.
Soon after the demise of the commissariat receipts in the 1840s, companies and individuals began issuing their own printed promissory notes, for a stated amount on demand (ominously known as shin plasters). Even though the banks were beginning to issue paper money, their notes were treated with suspicion, until their reliability was established. Gold remained supreme!