The Mackinnon group's entry into Australian shipping and other business ventures began during the upswing in the business cycle that took place between 1879 and 1882, and was in many respects the last phase in a diversification of shipping interests started by the opening of the Suez Canal. However, the Australian initiative was fairly quickly overtaken by a transformation in the international economic environment that had commenced in the mid-1870s but was most pronounced in the years between 1882 and 1896. Decelerating economic growth in Britain, reflected in turn in a slowdown in its trade with foreign countries and imperial territories, was accompanied by an ‘internationalisation’ of the business cycle. This saw Britain and France experience severe depression during the middle 1880s. Then, after a short recovery towards the end of the decade, both were joined from 1891 onwards by Germany, the United States and much of the rest of the world, in an even deeper downturn in economic activity. Overall, it was a time of slackening world trade, of widespread economic instability, and of falling prices for manufactures and commodities. It was also a period of heightened international tensions, as old European imperial rivalries were exacerbated by prevailing economic conditions and newer industrial powers such as Germany began to acquire colonial possessions. Across the tropical world – in Southeast Asia, the Pacific and Africa – techniques of ‘informal imperialism’ were being abandoned or by-passed in a scramble for territorial possessions while in China the European powers competed with each other to stake out new ‘spheres of influence’. British India, in which the Mackinnon group's core business interests were located, was affected by these political developments in that some of the arenas of great power rivalry lay close to its borders and because it was a major source of military manpower for the British Empire as a whole.

Nowhere were the changing economic conditions felt more keenly than in the British mercantile marine. Freight rates for cargo carried into and out of British ports (Figure 12.1) declined by 50 per cent between 1880 and 1893.