194 THE BALANCE OF INDEBTEDNESS, 1918-28 
a very broad fashion, is very difficult to come by.l That we must 
look to the importation of capital, both public and private, for 
the major dynamic behind these economic changes is now 
certain ; but the main difficulty here concerns the computation 
of the amount of private capital which has been invested in 
Australia during recent years. A further attempt must be made, 
therefore, to reckon the balance of indebtedness over the period 
as a logical conclusion to the survey respecting the terms of 
trade. 
I. The Commodity Balance of Trade. 
The importance of the commodity balance of trade as an 
item in the total balance of indebtedness has already been dis- 
cussed at some length. The argument may now be taken forward 
another stage by indicating some of the more obscure effects of 
borrowing upon the movement of commodities. Viner has 
demonstrated conclusively that when a disturbing factor of 
substantial proportions and long-continued duration, such as 
the Australian overseas borrowings, ‘breaks the even balance 
of debit and credit international obligations, an even balance 
of payments is re-established, and is maintained in spite of the 
debit balance of indebtedness, mainly through compensatory 
variations in the commodity balance of trade, exclusive of 
gold’. It is important to realize, first, how this compensatory 
variation takes effect, and, secondly, the relatively greater part 
played in the process of equilibration by imports as compared 
with exports. 
In the article from which a quotation has been selected to 
introduce this chapter, A. C. Whitaker has shown that, with the 
exception of the commodity balance and overseas borrowings, 
all the other items in the balance of indebtedness are relatively 
constant. They are of the nature of fixed charges, and our 
previous examination of the Australian balance has shown 
within how narrow a margin interest, freight, tourist expendi- 
bure, insurance, and the rest, fluctuate from year to year. The 
tension is sustained by the inflow and outflow of commodities ; 
1 For the best and most exhaustive discussion of the post-war exchange position, 
as well as for a clear exposition of the principles governing Anglo-Australian 
sxchange, reference should be made to the section entitled ‘The Banking System 
of Australia’, by Professor D. B. Copland, in Foreign Banking Systems, 1929 
(Henry Holt & Co.).