Information about currency: Australian Pound

In 1812, Governor Lachlan Macquarie of New South Wales bought Spanish dollar coins, following the arrival of the ship Samarang at Port Jackson with 40,000 Spanish dollars, paying four shillings and nine pence for each dollar. He was worried that the coins would quickly be exported out of the colony and had holes cut in the middle of them to try to keep them in Australia. These were known as Holey dollars (valued at five shillings), with the piece from the middle being called the Dump (valued at around 15 pence). Both were declared legal currency on 30 September 1813 and went into circulation in 1814.

British currency became the official currency of the Australian colonies after 1825, with almost £100,000-worth of British coins being imported during 1824-25. The Holey dollar was no longer legal tender after 1829.

From 1817, when the first bank, the Bank of New South Wales, was established, private banks issued paper money denominated in pounds. In 1852, the Government Assay Office in Adelaide issued gold pound coins. These weighed slightly more than sovereigns. From 1855, the Sydney mint issued half sovereigns and sovereigns, with the Melbourne mint beginning production in 1872. Many of the sovereigns minted in Australia were for use in India as part of a plan that the gold sovereign should become the imperial coin. As it turned out, India was already too entrenched in the Rupee system, and the gold sovereigns obtained by the treasury in India never left the vaults.

Thus, in the lead-up to Federation, the currency used in the Australian colonies consisted of British silver and copper coins, Australian minted gold sovereigns (worth £1) and half sovereigns, locally minted copper trade tokens (suppressed in 1881, some state earlier) and private bank notes.

In 1910 a national currency was introduced by the Labor Government of Prime Minister Andrew Fisher. The new national currency was called the Australian pound, consisting of 20 shillings, each consisting of 12 pence. Monetary policy ensured that the Australian pound was fixed in value to the pound sterling. As such Australia was on the gold standard so long as Britain was.

In 1914, the pound sterling was removed from the gold standard. When it was returned to the gold standard in 1925, the sudden increase in its value (imposed by the nominal gold price) unleashed crushing deflationary pressures. Both the initial 1914 inflation and the subsequent 1926 deflation had far-reaching economic effects throughout the British Empire, Australia and the world. In 1929, as an emergency measure during the Great Depression, Australia left the gold standard, resulting in a devaluation relative to sterling. A variety of pegs to sterling applied until December 1931, when the government set a rate of £1 Australian = 16 shillings sterling (£1·5s Australian = £1 sterling).

During World War II, the Empire of Japan produced currency notes, some denominated in the Australian pound, for use in Pacific countries intended for occupation. Since Australia was never occupied, the occupation currency was not used there, but it was used in the captured parts of the then-Australian territories of Papua and New Guinea.

In 1949, when the United Kingdom devalued the pound sterling against the US dollar, Australian Prime Minister and Treasurer Ben Chifley followed suit so the Australian pound would not become over-valued in sterling zone countries with which Australia did most of its external trade at the time.