Australia and the 1930s

The Great Depression

A SUMMARY

Economic Problems Aus. gov’t must pay the interest on British loans End of 20s: imports high; import prices & export volume

steady BUT Aus. depends on ability to meet cost of imports (£150m) and their exports of wool and wheat

Export prices unstable Major balance of payments develops = decline of export

earnings and cease of loans from overseas Depression worsened as those dependent on public

funds/works which are closed down (e.g. MMM) mean 200,000 people immediately unemployed

Financial return from 1920s expenditure (MMM) only 1.5% Little co-operation between State and Fed. Gov’ts: prosperity

of the 1920s exaggerated; spending not moderated

1920s Borrowing 1927-8: borrowing from London/NY = £63.5m

PLUS $50m US loan for 1928-9 needs Critics recognise that Aus’ problem is that the cost

of servicing the debt outstripped their ability to pay; higher spending & standard of living that economy should allow

No direct taxation Public expenditure becomes wasteful as loans

are cheap and easy to obtain 1929: loan interest is 19.2% of export earnings,

6.1% of national income

Other financial problems… Wages too high Industrial unrest weakens economy Banks too lenient with lending policies because of

competition between Commonwealth and private banks

Tariffs: protection of industries due to artificially high international prices. 1st and 2ndry industries dependant on gov’ts

High costs mean Australian consumers cannot afford to buy this means Aus. products are expensive on the int. market

The Impact of the Depression A downward spiral…1. Wool and wheat prices collapse and overseas

loans dry up…meaning…2. A fall in the primary industry and a reduction in

spending on public works…which…3. Results in unemployment…and…4. Causes a reduction in demand for goods and

services…which in turn…5. Leads to more unemployment1932: 1 family in 4 had no income

Summary Australia was dependant on foreign investment and overseas

markets for primary products. Therefore, it was badly affected by the Depression

While the economic situation of the 1920s was good for most Australians, 1920s society was divided as not everyone enjoyed the benefits of the growing economy

As such, growth was based on borrowed money and a high level of protection leading to an artificially high standard of living

Therefore, when the Depression arrived, living standards for most Australians changed dramatically