Australia and the 1930s

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Summary of the economic causes of the 1930s Depression in Australia.

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Australia and the 1930s

  1. 1. Australia and the 1930s The Great Depression A SUMMARY
  2. 2. Economic Problems <ul><li>Aus. gov’t must pay the interest on British loans </li></ul><ul><li>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 </li></ul><ul><li>Export prices unstable </li></ul><ul><li>Major balance of payments develops = decline of export earnings and cease of loans from overseas </li></ul><ul><li>Depression worsened as those dependent on public funds/works which are closed down (e.g. MMM) mean 200,000 people immediately unemployed </li></ul><ul><li>Financial return from 1920s expenditure (MMM) only 1.5% </li></ul><ul><li>Little co-operation between State and Fed. Gov’ts: prosperity of the 1920s exaggerated; spending not moderated </li></ul>
  3. 3. 1920s Borrowing <ul><li>1927-8: borrowing from London/NY = £63.5m PLUS $50m US loan for 1928-9 needs </li></ul><ul><li>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 </li></ul><ul><li>No direct taxation </li></ul><ul><li>Public expenditure becomes wasteful as loans are cheap and easy to obtain </li></ul><ul><li>1929: loan interest is 19.2% of export earnings, 6.1% of national income </li></ul>
  4. 4. Other financial problems… <ul><li>Wages too high </li></ul><ul><li>Industrial unrest weakens economy </li></ul><ul><li>Banks too lenient with lending policies because of competition between Commonwealth and private banks </li></ul><ul><li>Tariffs : protection of industries due to artificially high international prices. 1 st and 2 ndry industries dependant on gov’ts </li></ul><ul><li>High costs mean Australian consumers cannot afford to buy  this means Aus. products are expensive on the int. market </li></ul>
  5. 5. The Impact of the Depression <ul><li>A downward spiral… </li></ul><ul><li>Wool and wheat prices collapse and overseas loans dry up… meaning… </li></ul><ul><li>A fall in the primary industry and a reduction in spending on public works… which… </li></ul><ul><li>Results in unemployment …and… </li></ul><ul><li>Causes a reduction in demand for goods and services …which in turn… </li></ul><ul><li>Leads to more unemployment </li></ul><ul><li>1932: 1 family in 4 had no income </li></ul>
  6. 6. Summary <ul><li>Australia was dependant on foreign investment and overseas markets for primary products. Therefore, it was badly affected by the Depression </li></ul><ul><li>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 </li></ul><ul><li>As such, growth was based on borrowed money and a high level of protection leading to an artificially high standard of living </li></ul><ul><li>Therefore, when the Depression arrived, living standards for most Australians changed dramatically </li></ul>

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