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
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