In both Australia and the United States, railroads were seminal to settlement. In the American West, moreover, they serviced a similar economy to that found in the Australian interior, linking farms and pastoral properties to global markets. However, whereas United States railroads were exemplars of private enterprise, Australia's railroads were not only state-owned but also operated as monopoly providers in each colony. This variance meant that they were largely free of the competitive pressures that characterized American railroads. Despite this difference, Australian freight rates declined at a similar pace to those in the American West. This chapter argues that such similarities indicate that the main factor determining freight rates in both Australia and the American West was not competition but falling commodity prices. Australia's railroads differed from those of America, however, in their response to increased indebtedness after 1890. Whereas Australia's railroads reduced operating costs, those in the United States did not. Two factors explain this divergence. First, Australia's railroads, as instrumentalities under the British Crown, could not declare bankruptcy as United States railroads did. Second, the managerial inexperience of Australia's politicians and railroad officials meant that they failed to realize that service reductions were a self-defeating response to capital indebtedness as falling operating costs were associated with falling income: an outcome that made interest more rather than less problematic.
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