27 Oct 2017
A rapid rise and contraction of property prices. Poor lending standards. A run on banks and the near collapse of the financial system. Not the Global Financial Crisis of 2008 but the rise and fall of Marvellous Melbourne nearly 100 years before.
You can step back into this period at the corner of Collins and Queen Street in Melbourne where a collection of buildings are included in the Historic Buildings Register for their important links to this tumultuous period.
"The Gothic Bank stands as a reminder of the boom and bust at the end of the 19th Century which gripped Australia, shaped Melbourne and still has resonance today.”
At 388 Collins Street is the Verdon Chambers, affectionately known to most people in Melbourne as the ‘Gothic Bank’, and listed by the National Trust of Australia as of “world significance”.
While many other buildings of the era are long-since demolished, the Gothic Bank stands as a reminder of the boom and bust at the end of the 19th Century which gripped Australia, shaped Melbourne and still has resonance today.
Completed for ANZ predecessor bank the English, Scottish and Australia Chartered Bank (ES&A) at the height of Australia’s boom in the 1880s, it was intended to convey an image of prestige and solidity. As the decade wore on, events took a different turn.
The economic boom at the end of the 19th Century had its roots in the Gold Rush of the 1850s which transformed Melbourne from a city of 75,000 people to over 500,000 ten years later.
The amount of gold – found over a relatively short 10 year period – still equates to 2 per cent of the gold ever mined globally and would be worth around nine billion dollars in today’s terms.
Clearly, as Dr Richard Gillespie from Museum Victoria has noted, at the end of Victoria’s Gold Rush this meant there were a number of people with huge amounts of money to invest. Coupled with an influx of investment from overseas (the UK in particular) it drove both an enormous growth in construction and speculation.
It fuelled the development of new railways and tramways, which in turn led to the creation of new suburbs across Melbourne and development in the city itself which reflected the new prosperity.
It also caused an extraordinary boom in real estate prices. In an early example of what we would recognise as a property bubble, by 1889 the value of land in parts of central Melbourne was as high as in London.
In fact it’s a measure of the growth in value of real estate that before construction of the Gothic Bank began, the site had previously changed hands for a mere £61 and was best known as the location of the ‘Groggery’ – home to Australia’s first licenced billiard table.
For the construction of the Gothic Bank on the other hand, General Manager Sir George Verdon was set a strict budget of £40,000.
As with many construction projects however, construction rapidly exceeded budget to the extent ES&A directors in London dispatched a director in a forlorn attempt to control costs. The final cost of construction came in at £77,393.
While the exterior is relatively plain for a Gothic Building, the banking chamber and Verdon’s residence above, containing 17 rooms, were sumptuously decorated including an expenditure of £1961 on carpentry, £1002 for stonemasonry and £8000 for furniture.
Peter Lovell, a heritage consultant, has suggested the result contains “some of the most important historic interiors in the country, the complexity and richness of which is unsurpassed”.
Fortunately for ES&A’s directors, the newly commercial city also needed a more structured stock market. ES&A was able to step in and sell the L-shaped section of land behind the new bank to the Melbourne Stock Exchange for £65,000. Through this transaction, they were able to recoup the costs of the new bank.
Side by side, the buildings represent the work of two of Australia’s foremost architects who played a key role in shaping Australia’s cities. William Wardell, who designed the Gothic Bank, also designed St Patrick’s Cathedral and Government House in Melbourne and St Mary’s Cathedral in Sydney.
William Pitt designed the Stock Exchange and a host of other iconic Melbourne buildings including the Oldersfleet buildings on Collins, the Melbourne Safety Deposit Building and the Bryant and May factory in Richmond.
Ironically, William Pitt and the Stock Exchange he designed are symbolic of the reversal of fortunes of the 1890s. As the Reserve Bank of Australia notes, the “over-extension of the property boom and its unravelling led to an abrupt collapse of private investment...and urban development and a sharp pullback in infrastructure investment.”
“A fall-off in capital inflow, adverse movements in terms of trade and drought accentuated the depression” according to the bank.
In an augur of the Global Financial Crisis of 2008, the property boom was “financed by rapid expansion in bank lending. In addition, many building societies and property finance companies sprang up,” the RBA wrote, with the increased competition “weakening prudential standards”.
The ensuring collapse in property prices led to “a spate of building society failures which spread to land banks. Public confidence in financial institutions faltered spreading the crisis to the institutions at the core of the financial system – banks that issued their own bank notes”.
Many banks closed permanently while others were later taken over by stronger banks. For its part, ES&A was also severely impacted by the depression in 1893.
Verdon was cristicised for his role, as his biography notes.
“Verdon's comments on various accounts suggest that he authorised some unwise advances,” it reads. “Although the bank's failure in 1893 was not his fault alone, he had allowed liquidity standards and coin and bullion ratios to fall.”
William Pitt meanwhile saw commissions dry up entirely and suffered losses from investments. His Stock Exchange building was sold back to ES&A for only £136,500 – somewhat less than the £254,000 it initially cost – to alleviate financial difficulties at the Stock Exchange.
The Branch itself was almost lost in 1912 when a large fire broke out in a nearby warehouse. Fortunately, the sister of Charles Wren, the General Manager of ES&A at the time, raised the alarm and those staying in the building managed to fight the fire from the roof saving both this building and the Stock Exchange.
It remained the residence of ES&A’s General Managers until 1933.
As current custodian of the site, ANZ Branch Manager Kevin Tunstall has a unique role within the Bank.
“It’s a privilege which I certainly don’t take for granted,” he says. “I think our team has an ‘attitude of gratitude’ being part of ANZ’s cultural history, especially when you look up at the ceiling and see exquisite art or see honour rolls around the banking chamber containing the names of ANZ staff who fought and died in combat.
“Of course, there are some very real challenges working within a heritage site, for example if we have any work completed. We also have to remind customers and visitors about the layout and to mind out for the ornate fixtures and fittings.”
Tunstall says the branch has have many visitors each day and it can often be hard to distinguish them from customers.
“I’ve personally approached numerous customers who appeared to be waiting to speak to someone but have had them reply (as one customer did this week) ‘I’m just soaking up the environment’,” he says.
“But there is a sense of being part of something special as you arrive to work each day. As customers and visitors enter the branch you can see by the look on their faces that we are in a pretty special place. I’m pleased that we continue to preserve it for future generations.”
James Wilson is bluenotes history editor
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
27 Oct 2017
14 Sep 2017