Wool played a pivotal role in the growth of Melbourne as a commercial centre in the second half of the 19th century. As sheep numbers multiplied in south-eastern Australia after the 1860s, many firms sprang up to feast on the riches flowing from the golden fleece, providing services at every step along the route from the shearing shed to the woollen mills, and acting as stock and station agents. These pastoral finance houses, a generic term that encompassed a good deal of variety in the services on offer, came to congregate in the western end of the city, where their massive bluestone warehouses, long since used for other purposes, abutted the railway terminus and the wharves.
The industry evolved through a number of stages. The earliest firms in Melbourne, including Andrew Russell & Co. (1841), James Turner & Son (1841), Dalgety, Blackwood & Co. (1846), Richard Goldsbrough (1848) and William Sloane & Co. (1855), began as partnerships whose limited resources checked the scale and scope of their activities. However, they could not meet the demands placed on them by the expansion of the pastoral industry after the 1860s. The push into the interior raised demands for capital for fencing and water supply, and larger flocks greatly magnified the size of the clip to be financed, transported, stored and sold. New incorporated firms entered the industry from the 1860s, increasing dramatically in the 1880s, when the largest built up national operations. The dominance of larger firms was reinforced towards the end of the century by the rise of local wool sales requiring heavy investment in wool stores.
By the end of the 1870s, Melbourne was becoming the centre of the nation's wool trade, with the three most dominant firms - the British owned Dalgety, New Zealand Loan & Mercantile Agency Co. (NZL&MA) and the locally based Goldsbrough Mort - located there by the late 1880s. Other local houses, such as Australian Mortgage & Agency Co. Ltd (AMA), Union Mortgage & Agency Co. (UMA) and Younghusband & Co., reinforced the importance of Melbourne as a wool centre. However, the pastoral industry came under severe pressure in the 1890s as wool prices fell, drought decimated stock numbers and station values collapsed. Goldsbrough Mort wrote down its capital in 1893; the UMA was reconstructed as Australian Estates & Mortgage in 1894, and AMA sold its wool-selling business to British-domiciled Australian Mortgage Land & Finance Co. Ltd (AML&F) in 1904 before going into liquidation in 1912. Dalgety transferred its principal office to Sydney, leaving Goldsbrough Mort and NZL&MA as the only Melbourne-based firms of national prominence in the 20th century. Geelong-based firms Strachan & Co. Ltd and Dennys, Lascelles Ltd, whose origins lay in the 1830s and 1850s respectively, were important rivals. The influence of Melbourne firms was reduced after 1962, as a South Australian rival, Elder Smith, acquired Goldsbrough Mort and Younghusband in 1971. Both the Geelong firms, Strachan and Dennys, were acquired by AML&F in 1978. The tables were turned in spectacular fashion in 1981, when the aggressively expansionist Melbourne company Henry Jones (IXL) acquired both Elders and AML&F, establishing Elders as the country's premier pastoral company.