Melbourne, still the powerhouse by Rod Myer
MELBOURNE, the village John Batman founded 175 years ago in August 1835, has morphed into an economic monster that has swallowed the surrounding plains and woodlands that served as the base for the millenniums-old economy of the Wurundjeri people before European settlement.
The city’s economy is bigger than New Zealand’s, with 4 million people and a gross product of about $212 billion. And its manufacturing and service businesses give it a far more diverse and deep economic base than its trans-Tasman neighbour. It is home to some of Australia’s best-known business names and the staid business image it developed in the mid-20th century has been transformed as a host of new enterprises in areas like IT, biotech and financial services make their presence felt.
Not everything has been straightforward in Melbourne’s exponential growth path since 1835 and perhaps the experience of Batman himself was a harbinger. On arrival, he cut a deal with (he claimed) eight Wurundjeri leaders, receiving 2400 square kilometres of land in return for a cache of household goods and clothing and promises of the same every year as rent.
Two months later, Governor Bourke in Sydney annulled the deal, another settler – John Pascoe Fawkner – took up land in Batman’s village and the Wurundjeri lost their land and promised income. In 1839 the Melbourne Club made its home in Fawkner’s hotel.
Melbourne grew into a wattle and daub village servicing surrounding farms, until gold was discovered in July 1851, the same month Victoria became a separate colony. The result was a population explosion. At the start of the gold rush Melbourne had 20,000 people; two years later it had 123,000. By 1880 the population had more than doubled and by 1890 quadrupled.
The gold years made Victoria rich and in the 1850s Melbourne was one of the world’s wealthiest cities on a per capita basis. The banks were so full of gold they stopped paying deposit interest and the first significant land boom ensued.
All these people had to be serviced, accommodated, fed and transported, and after the gold rushes Melbourne started to grow into a more sophisticated economy, with manufacturing and services taking an important place in the city. Brewing, food processing, transport equipment (in those days predominantly horse-drawn), household goods and heavy equipment for the mining and agricultural industries continued to grow through the late 19th century. Newspapers proliferated and the outspoken David Syme took control of The Age in 1859, running fierce political campaigns for 40 years.
The railways were snaking out to the mining and pastoral centres like Ballarat, Bendigo and Echuca, and construction of the web of suburban lines that allowed Melbourne to sprawl was well under way by the 1880s. As the ’80s progressed, the riches earned from mining and wool generated a huge land boom. ”Marvellous Melbourne” ballooned with the construction of edifices like Parliament and the Exhibition building, and everywhere what once was farmland was turned into suburbs, often with the arrival of a railway.
The boom became unsustainable, with land rising from 15 shillings a foot in Surrey Hills in 1884 to £15 three years on, and in Swanston Street from £400 to £1100 a foot at the end of the decade. In 1890 things began to unwind with frightening ferocity.
In 18 months from 1891, 20 financial institutions collapsed and 120 public companies went under. By the decade’s end there was hardly a bank that had not closed its doors at some point. One survivor was the forerunner of the State Bank of Victoria, which met its demise 100 years on. Unemployment reached catastrophic but then unrecorded levels and 50,000 people left the city in the early 1890s.
Despite all the gloom of the era, the late 19th century saw the development of significant enterprises that served as a base for later development. The 18-year-old H. V. McKay created his revolutionary Sunshine combine harvester, which transformed farm life in 1884, and went into production. His 30-hectare works in Sunshine (named after the machine) employed 3000 people at its peak in the 1920s.
Consolidation gradually transformed the myriad small factories that dotted the city after the gold rush into the industrial icons of the 20th century. Cardboard manufacturer APM (later Amcor) was put together from an agglomeration of small operators, Carlton & United Breweries swallowed smaller breweries like Foster’s and several independent tramway companies were combined in government ownership.
Hardware manufacturer McPhersons was formed in 1860 by William McPherson, who was later premier. It is still listed on the sharemarket, with a large homewares and printing business.
The rural economy contributed mightily to Melbourne’s wealth from its earliest days. When we rode the sheep’s back, the squattocracy from the Western District and elsewhere spent big on consumer goods, shares and property and often sent their children to the city for an education. The region was home to some of the big produce brokers and rural financiers like Goldsborough Mort, Dalgety and Australian Estates. The inner-western suburbs were until recently dominated by huge abattoirs, and the sprawling Newmarket saleyards survived in inner-urban Kensington until 1987.
Australia devoted massive resources and the lives of 60,000 of its young men to World War I. But when the fighting ended, people looked for respite and the consumer era dawned with the coming of the motor car and undreamt of electrical goods. That era was driven by an eclectic breed of business identities who made a mark in public life as well as commerce.
In the early 1920s the remarkable John Monash, already a pioneer in reinforced concrete, a promoter of community service, and Australia’s World War I military commander, oversaw the formation of the State Electricity Commission with the building of a power station in the Latrobe Valley coalfields. In 1922 a former swimming champion named Frank Beaurepaire invested £550 he had received for saving a shark attack victim, forming the Beaurepaire and Olympic tyre groups to manufacture tyres for the growing car industry. He was Melbourne’s lord mayor from 1940 to 1942.
The city’s retailing was revolutionised between the wars by two other great innovators: Russian-born Sidney Myer and George (G. J.) Coles, from Murtoa. Both men were inspired by US retailing developments and both listed on the stock exchange in the 1920s. Myer spoke directly to women with his advertising and Coles ran on the slogan ”Nothing over 2/6”. Myer won admiration funding public works and hosting free Christmas lunches during the 1930s Depression. Coles financed the construction of the Howard Florey medical research institute.
The 1929 crash hit Melbourne hard, with unemployment reaching 30 per cent. Businesses closed, land developers collapsed and young unemployed men took to the roads seeking casual work in the countryside. Recovery was slow through the ’30s but entrepreneurs still looked to new horizons. In 1936 a Western District bus operator named Reg Ansett took to the air with a six-seater Fokker Universal, laying the foundation for the airline that would bear his name until its 2001 collapse.
World War II sparked industrial development, with government factories producing munitions and aircraft at Fishermans Bend, Maribyrnong and Footscray. Post-war manufacturing built on this, with Holden producing its first vehicle in 1948. Ford, which had assembled cars at Geelong from the 1920s, moved to genuine production, and Toyota and Nissan followed later. Only Holden, Toyota and Ford remain.
The post-war years utterly transformed Melbourne, with a wave of European immigration bringing new cultural strands and a plethora of new entrepreneurs. Jewish refugees flocked to the rag trade where people like Sussan entrepreneur Marc Besen prospered, while the southern Europeans tended to favour retail and construction. Italian Australians Bruno and Rino Grollo added edifices like the Rialto to Melbourne’s skyline while Carlo Valmorbida and his family built a fortune in food importing.
Migration from Asia and elsewhere and the wholesale move of women into the workforce since the 1970s have created yet another new pool of business talent, like Jeanswest driving force Wilkin Fon, female business pioneer Eve Mahlab and company directors Margaret Jackson and Catherine Walter.
Then there’s the money game. Melbourne has a long history as a source and manipulator of capital, which in turn brought some of the country’s biggest companies to domicile here. Prominent among those names in the past was the Collins House group of companies, in which the Baillieu family were significant investors and which developed major mining operations, particularly in base metals.
Jonathan Binns Were started out in the 1840s trading land and produce but moved into shares when a rudimentary market evolved. He was inaugural chairman of the Melbourne Stock Exchange in 1865 and, despite a couple of bankruptcies, played an important part in the city’s financial and community life until his death in 1885.
Were started an independent broking tradition that lasted into the 1980s and beyond and included names like bond market pioneer Ian Potter and broker to the ’80s entrepreneurs John McIntosh. Following financial deregulation, the independent players were swallowed by international investment banks or local banking majors.
Even the venerable JB Were for a time joined US investment bank Goldman Sachs. Recently, Melbourne-based National Australia Bank bought 80 per cent of its private client arm and the company is again trading as JBWere. Another Melbourne broking stalwart, EL & C Baillieu, which dates to the 1880s, is now in partnership with international giant Credit Suisse, and the few independents remaining, like BGF and Austock, are niche players.
Melbourne funds management icon National Mutual was bought by French group AXA in the 1990s and is now being hunted by NAB and AMP. Two of the big four banks, NAB and ANZ, are still based in Melbourne. Finance is an international game today and big companies like BHP Billiton, Rio Tinto (the former CRA) and Amcor still find Melbourne an attractive place to domicile and raise capital. And the city has become a centre of the industry super funds business, giving it a healthy slice of that sector’s $220 billion in funds under management.
Melbourne’s future will in part be built on the creativity and ability of new players finding niche markets among the international giants of the global age. Carolyn Creswell started Carmans Fine Foods 18 years ago and now sells what she calls packaged premium foods to Australian supermarkets, airlines and 26 international markets.
Jason Lohrey’s Arcitecta group is building a business in digital data-management technology. His customers include the CSIRO and the Howard Florey Institute, and and he has significant international arrangements.
Source: The Age