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.