Early in 1879 the McIlwraith Ministry assumed office, at a time when, as the Premier himself admitted in his Budget speech of 1880, the colony was "emerging from a state of depression induced by three bad seasons of an extraordinary character," so that the year 1878-9 closed with the considerable deficit of L216,808. This was partly due, however, to the operation of the Western Railway Act and the Railway Reserves Act, by which the most saleable land in the colony had been included in railway reserves, and the proceeds of sales, instead of as previously going into consolidated revenue, were placed to the credit of a special fund. Mr. (afterwards Sir Thomas) McIlwraith while in opposition had predicted that this course would produce a revenue deficit; consequently on attaining office he induced Parliament to sanction the transfer of all these sums, totalling L382,346, to consolidated revenue. Mr. McIlwraith argued that it would be impossible to construct a tithe of the railways needed in different parts of the colony out of the proceeds of land sales, and that it would be sufficient if the interest on railways, until they became fully reproductive, were defrayed from that source. Parliament accepted that view, and forthwith authorised a loan of 3 millions for a comprehensive schedule of railways proposed by the Government in 1879-80. Between August, 1879, and May, 1883, loans amounting to L5,553,000 were floated and a further sum of L1,233,000 was authorised, but not placed on the market. During the McIlwraith Administration of 1879-83 the revenue increased from rather less than 11/2 millions to 21/2 millions. The period was characterised by two deficits and three surpluses, showing accumulated surpluses of L272,412, without taking into account the sum of L382,346 transferred to revenue. During these years the colony was prosperous, the fair seasons, large loan expenditure, the establishment of the British-India service _via_ Torres Strait, and the free introduction of immigrants, all combining to push the country along the path of progress; but prosperity had compelled a _pro rata_ increase of expenditure.